EUR/USD Forecast: Euro looks to extend sideways grind
- EUR/USD continues to fluctuate in a tight range above 1.1750 on Tuesday.
- The Federal Reserve will publish the minutes of the December meeting.
- The technical outlook points to a neutral stance in the near term.
EUR/USD struggled to make a decisive move in either direction on Monday to close virtually unchanged. The pair continues to move sideways, slightly above 1.1750, in the European session on Tuesday. The neutral technical stance and thin trading conditions ahead of the New Year holiday could cause the pair to remain in a consolidation phase in the short term.
Euro Price This Month
The table below shows the percentage change of Euro (EUR) against listed major currencies this month. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.44% | -2.01% | -0.12% | -2.10% | -2.39% | -1.43% | -1.78% | |
| EUR | 1.44% | -0.57% | 1.34% | -0.66% | -0.96% | 0.03% | -0.33% | |
| GBP | 2.01% | 0.57% | 2.17% | -0.09% | -0.39% | 0.61% | 0.22% | |
| JPY | 0.12% | -1.34% | -2.17% | -2.01% | -2.29% | -1.31% | -1.69% | |
| CAD | 2.10% | 0.66% | 0.09% | 2.01% | -0.34% | 0.70% | 0.32% | |
| AUD | 2.39% | 0.96% | 0.39% | 2.29% | 0.34% | 1.00% | 0.59% | |
| NZD | 1.43% | -0.03% | -0.61% | 1.31% | -0.70% | -1.00% | -0.38% | |
| CHF | 1.78% | 0.33% | -0.22% | 1.69% | -0.32% | -0.59% | 0.38% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The data from the US showed on Monday that Pending Home Sales increased by 3.3% in November. This reading came in better than the market expectation of 1% but failed to trigger a noticeable market reaction. Meanwhile, the Federal Reserve Bank of Dallas noted in its monthly report that the Dallas Fed Manufacturing Index edged lower to -10.9 in December from -10.4 in November.
Later in the day, the Federal Reserve will publish the minutes of the December policy meeting. In case the publication shows that policymakers are willing to take some time to assess the economic conditions before cutting the policy rate again, the US Dollar (USD) could hold its ground and make it difficult for EUR/USD to edge higher. Conversely, a dovish tone, with officials reaffirming the need to support the labor market and confidence about inflation not rising again, the USD could come under bearish pressure. Nevertheless, markets are unlikely to get out of the holiday mood until next week.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) has flattened and now caps near 1.1777 as the pair slips marginally beneath it. The 50-, 100-, and 200-period SMAs trend higher below price, reinforcing a positive underlying bias. The 50-period SMA at 1.1756 offers nearby dynamic support. The Relative Strength Index (14) stands at 49, neutral and easing, which hints at fading intraday momentum.
Measured from the 1.1503 low to the 1.1800 high, the 23.6% retracement at 1.1730 aligns as a key support level, followed by the 38.2% retracement at 1.1687 next. Immediate resistance aligns at 1.1800 (static level) ahead of 1.1840 (upper limit of the ascending channel).
(The technical analysis of this story was written with the help of an AI tool)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
