EUR/USD Forecast: Euro rebounds on EU-US trade deal optimism
- EUR/USD recovers to the 1.1750 area after posting losses on Monday.
- The EU is reportedly closing in on a trade agreement with the US.
- Improving risk mood could help the pair stretch higher.
EUR/USD started the week on a bearish noted and lost more than 0.5% on Monday. The positive shift seen in risk mood helps the pair regain its traction on Tuesday, as markets turn optimistic about the European Union and the United States reaching a deal on trade.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.33% | -0.10% | 0.09% | -0.27% | -0.75% | -0.37% | -0.20% | |
| EUR | 0.33% | 0.24% | 0.46% | 0.06% | -0.44% | -0.04% | 0.13% | |
| GBP | 0.10% | -0.24% | 0.24% | -0.17% | -0.68% | -0.28% | -0.11% | |
| JPY | -0.09% | -0.46% | -0.24% | -0.37% | -0.86% | -0.43% | -0.20% | |
| CAD | 0.27% | -0.06% | 0.17% | 0.37% | -0.51% | -0.10% | 0.06% | |
| AUD | 0.75% | 0.44% | 0.68% | 0.86% | 0.51% | 0.40% | 0.58% | |
| NZD | 0.37% | 0.04% | 0.28% | 0.43% | 0.10% | -0.40% | 0.17% | |
| CHF | 0.20% | -0.13% | 0.11% | 0.20% | -0.06% | -0.58% | -0.17% |
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 Donald Trump signed an executive order to push the deadline for the implementation of tariffs to August 1, while unveiling higher rates in letters sent to large trading partners, such as Japan and South Korea.
Citing EU sources familiar with the matter, Reuters reported that the EU was not among the countries that received a letter and that they were eyeing a possible exemption from the 10% baseline US tariffs. Some EU sources further noted that the EU was close to reaching an agreement with the Trump administration.
In the European session on Tuesday, US stock index futures trade modestly higher. In the absence of high-tier data releases, a bullish opening in Wall Street, followed by a risk rally, could make it difficult for the US Dollar (USD) to find demand and allow EUR/USD to continue to stretch higher. On the flip side, the pair could lose its traction in case markets turn risk-averse.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart recovered to 50 and EUR/USD was last seen fluctuating near the 20-period and the 50-period Simple Moving Averages (SMA), highlighting a loss of bearish momentum.
On the upside, 1.1780 (mid-point of the ascending channel) aligns as the first resistance level before 1.1830 (static level) and 1.1900 (round level, static level). Looking south, support levels could be seen at 1.1720 (static level), 1.1680 (lower limit of the ascending channel) and 1.1650 (100-period SMA).
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.
