EUR/USD Forecast: Euro poised to stretch higher after US tariff pause
- EUR/USD trades decisively higher on the day above 1.1000 on Thursday.
- The US Dollar (USD) stays under bearish pressure as US-China trade war heats up.
- The US economic calendar will feature inflation data for March.
After rising toward 1.1100 on Wednesday, EUR/USD lost its traction in the American session and closed the day virtually unchanged. The pair gathers bullish momentum in the European session on Thursday and trades comfortably above 1.1000.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.65% | 0.16% | 0.51% | -1.21% | -1.65% | -1.55% | -0.97% | |
| EUR | 0.65% | 1.10% | 1.84% | 0.06% | -1.07% | -0.29% | 0.29% | |
| GBP | -0.16% | -1.10% | -0.58% | -1.03% | -2.14% | -1.37% | -0.80% | |
| JPY | -0.51% | -1.84% | 0.58% | -1.70% | -1.20% | -0.82% | -1.13% | |
| CAD | 1.21% | -0.06% | 1.03% | 1.70% | -0.78% | -0.34% | -0.03% | |
| AUD | 1.65% | 1.07% | 2.14% | 1.20% | 0.78% | 0.79% | 1.38% | |
| NZD | 1.55% | 0.29% | 1.37% | 0.82% | 0.34% | -0.79% | 0.59% | |
| CHF | 0.97% | -0.29% | 0.80% | 1.13% | 0.03% | -1.38% | -0.59% |
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) came under renewed selling pressure in the European session on Wednesday and allowed EUR/USD to push higher after China responded to US tariffs by imposing additional 84% tariffs on US imports from April 10, up from the 34% previously announced.
Later in the American session, US President Donald Trump announced that he authorized a 90-day pause on reciprocal and 10% tariffs effective immediately but lifted the tariff rate on Chinese imports to 125%. In turn, the USD Index recovered its losses and forced EUR/USD to retrace its daily rally.
Early Thursday, China's Commerce Ministry and Foreign Ministry published a joint statement, saying that they will take further measures to oppose the US bullying. The USD struggles to build on Wednesday's rebound following this development and helps EUR/USD push higher.
In the second half of the day, the US Bureau of Labor Statistics will publish the Consumer Price Index data for March. On a monthly basis, the CPI and the core CPI are forecast to rise by 0.1% and 0.3%, respectively. In case the monthly core CPI reading comes in above the market expectation, the immediate reaction could support the USD and cap EUR/USD's upside. Conversely, a soft core CPI print could put additional weight on the USD's shoulders.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 60, reflecting a buildup of bullish momentum.
EUR/USD could face immediate resistance at 1.1050 (static level) before 1.1100 (static level) and 1.1145 (April 3 high). On the downside, 1.1000 (static level, round level) aligns as immediate support before 1.0950 (static level) and 1.0900 (static level, round 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.
