EUR/USD Forecast: Euro loses momentum but remains bullish
- EUR/USD consolidates weekly gains, holds above 1.1700 in the European session.
- US President Trump announced EU representatives will be in the US for trade talks on Wednesday.
- The European Central Bank will announce monetary policy decisions on Thursday.
EUR/USD rose for the third consecutive trading day on Tuesday and reached its highest level in two weeks at 1.1760. The pair corrects lower early Wednesday but the technical outlook suggests that the bullish stance remains unchanged.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.86% | -0.88% | -0.89% | -0.96% | -0.99% | -0.98% | -1.10% | |
| EUR | 0.86% | 0.05% | -0.05% | -0.12% | -0.17% | -0.30% | -0.29% | |
| GBP | 0.88% | -0.05% | -0.30% | -0.12% | -0.19% | -0.16% | -0.14% | |
| JPY | 0.89% | 0.05% | 0.30% | -0.06% | -0.05% | -0.14% | -0.04% | |
| CAD | 0.96% | 0.12% | 0.12% | 0.06% | 0.03% | -0.02% | -0.19% | |
| AUD | 0.99% | 0.17% | 0.19% | 0.05% | -0.03% | -0.06% | -0.01% | |
| NZD | 0.98% | 0.30% | 0.16% | 0.14% | 0.02% | 0.06% | -0.00% | |
| CHF | 1.10% | 0.29% | 0.14% | 0.04% | 0.19% | 0.00% | 0.00% |
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 US Dollar (USD) stays resilient against its rivals in the European session on Wednesday, possibly supported by improving prospects of the US economic outlook following the announcement of the trade deal with Japan.
Additionally, US President Donald Trump noted late Tuesday that representatives from the European Union (EU) will come to the US for the next round of trade negotiations on Wednesday. In case the EU and the US finally reach an agreement, the USD could extend its recovery with the immediate reaction. In this scenario, however, risk flows could continue to dominate the financial markets and limit the USD's gains.
On Thursday, the European Central Bank (ECB) will announce monetary policy decisions. Hence, investors could refrain from taking large positions ahead of this event and EUR/USD could stay in a consolidation phase unless there are significant developments on the EU-US trade relations.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart retreats toward 60 but EUR/USD holds comfortably above the 100-period Simple Moving Average (SMA), suggesting that the bullish stance remains intact but loses momentum.
On the downside, 1.1700 (100-period SMA) aligns as the first support level ahead of 1.1650 (Fibonacci 23.6% retracement of the latest uptrend) and 1.1630 (200-period SMA). Looking north, resistance levels could be seen at 1.1760 (static level), 1.1800 (static level, round level) and 1.1830 (static level).
Euro FAQs
The Euro is the currency for the 19 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.
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