EUR/USD Forecast: Euro rebounds but bulls remain hesitant
- EUR/USD holds steady above 1.0300 following Monday's volatile action.
- Headlines surrounding US President Trump's trade policy continue to drive markets.
- US economic calendar will feature JOLTS Job Openings data for December.
EUR/USD fluctuates in a narrow channel above 1.0300 in the European session on Tuesday following Monday's wild action. The pair's near-term technical outlook points to a loss of bullish momentum but buyers could remain hesitant amid the uncertainty surrounding US President Donald Trump's trade policy with the Eurozone.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | -0.24% | 0.22% | -1.71% | 0.09% | -0.25% | -0.65% | |
| EUR | -0.25% | -0.10% | 1.27% | -0.68% | 0.29% | 0.79% | 0.40% | |
| GBP | 0.24% | 0.10% | 0.27% | -0.58% | 0.40% | 0.89% | 0.48% | |
| JPY | -0.22% | -1.27% | -0.27% | -1.92% | 0.02% | 0.45% | -0.24% | |
| CAD | 1.71% | 0.68% | 0.58% | 1.92% | 0.72% | 1.48% | 1.07% | |
| AUD | -0.09% | -0.29% | -0.40% | -0.02% | -0.72% | 0.49% | 0.09% | |
| NZD | 0.25% | -0.79% | -0.89% | -0.45% | -1.48% | -0.49% | -0.40% | |
| CHF | 0.65% | -0.40% | -0.48% | 0.24% | -1.07% | -0.09% | 0.40% |
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).
After starting the week under heavy bearish pressure, EUR/USD reversed its direction and closed virtually unchanged on Monday. During the American trading hours, Mexico's President Claudia Sheinbaum said that the US has agreed to pause tariffs on Mexico for 30 days for further negotiations. Similarly, Canadian Prime Minister Justin Trudeau announced that Trump will postpone tariffs on Canadian imports for at least 30 days. These developments helped the market mood improve and made it difficult for the US Dollar (USD) to preserve its strength.
Early Tuesday, US stock index futures lose about 0.4% on the day, suggesting that markets remain cautious. In the meantime, Trump is yet to unveil how he wants to approach trade relations with Europe after telling reporters on Sunday that he would "definitely" impose tariffs on European imports.
In the second half of the day, the US economic calendar will feature JOLTS Job Openings data for December. Unless there is a significant divergence from the market expectation of 8 million, the market reaction to this data is likely to remain muted and short-lived.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 50, reflecting a loss of bearish momentum.
On the upside, 1.0350-1.0360 (200-period Simple Moving Average (SMA), Fibonacci 38.2% retracement of the latest downtrend) aligns as strong resistance area before 1.0400 (Fibonacci 50% retracement) and 1.0440 (Fibonacci 61.8% retracement).
In case the pair drops below 1.0290-1.0300 (Fibonacci 23.6% retracement, round level), technical sellers could take action. In this scenario, 1.0200 (static level, round level) could be seen as the next support 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.
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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.
