EUR/USD Forecast: Euro rebounds but EU-US tensions could cap upside
- EUR/USD started the week with a bullish gap.
- US President Trump threatened tariffs against eight European countries.
- The technical outlook doesn't yet point to a buildup of bullish momentum.
After closing the third consecutive week in negative territory, EUR/USD opened with a bullish gap and was last seen trading in positive territory above 1.1600. Although the broad-based selling pressure surrounding the US Dollar (USD) helps the pair hold its ground, Euro (EUR) buyers could turn hesitant amid escalating tensions between the European Union (EU) and the United States (US).
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.21% | -0.21% | -0.05% | -0.17% | -0.19% | -0.37% | -0.49% | |
| EUR | 0.21% | 0.01% | 0.17% | 0.04% | 0.04% | -0.16% | -0.28% | |
| GBP | 0.21% | -0.01% | 0.17% | 0.04% | 0.01% | -0.16% | -0.28% | |
| JPY | 0.05% | -0.17% | -0.17% | -0.15% | -0.16% | -0.34% | -0.46% | |
| CAD | 0.17% | -0.04% | -0.04% | 0.15% | -0.01% | -0.19% | -0.32% | |
| AUD | 0.19% | -0.04% | -0.01% | 0.16% | 0.01% | -0.18% | -0.31% | |
| NZD | 0.37% | 0.16% | 0.16% | 0.34% | 0.19% | 0.18% | -0.13% | |
| CHF | 0.49% | 0.28% | 0.28% | 0.46% | 0.32% | 0.31% | 0.13% |
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).
US President Trump said over the weekend that he will impose a 10% tariff from February 1st on all goods from eight European countries, namely Denmark, Sweden, France, Germany, the Netherlands, Finland, Britain and Norway, which oppose his plan to take Greenland.
Citing EU diplomats, Reuters reported on Sunday that EU ambassadors reached broad agreement to retaliate with a tariff package, the same one that was suspended for six months back in August, on 93 billion Euros of US imports.
Early Monday, French Finance Minister Roland Lescure said that blackmailing countries is unacceptable. Moreover, German Finance Minister Lars Klingbeil noted that there will be a strong response if the US imposes tariffs.
Financial markets in the US will remain closed in onservance of the Martin Luther King's Jr. Day holiday on Monday. Hence, investors will remain focused on the political developments. A further escalation of the EU-US tensions could make it difficult for the Euro to continue to outperform the USD.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1636. The 20-period Simple Moving Average (SMA) slopes lower beneath the 50- and 100-period SMAs. The 100-period SMA extends its slide as the 200-period SMA flattens, and price trades below the 50-, 100- and 200-period averages while holding marginally above the 20 SMA. The 20 SMA stands at 1.1625, offering nearby dynamic support. The Relative Strength Index (RSI) prints 51.9 (neutral), recovering from recent oversold readings.
Measured from the 1.1503 low to the 1.1800 high, the 61.8% retracement at 1.1615 offers interim support ahead of 1.1565 (Fibonacci 78.6% retracement). Looking north, the 50% retracement at 1.1650 could be seen as the next hurdle before 1.1690-1.1700 (Fibonacci 38.2% retracement, 200-period SMA, 100-period SMA).
(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.
