EUR/USD Forecast: Euro recovers above key technical level
- EUR/USD trades above 1.1650 in the European session on Tuesday.
- The near-term technical outlook doesn't offer any directional clues.
- The cautious market stance could limit the pair's upside.
EUR/USD started the week under bearish pressure and closed in negative territory on Monday. After dipping below 1.1650 during the Asian trading hours on Tuesday, the pair managed to recover above 1.1670 by the European morning. The near-term technical outlook points to a neutral stance.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.34% | 0.25% | 0.34% | 0.01% | 0.36% | 0.08% | 0.07% | |
| EUR | -0.34% | -0.10% | 0.00% | -0.33% | 0.03% | -0.29% | -0.26% | |
| GBP | -0.25% | 0.10% | -0.02% | -0.23% | 0.14% | -0.19% | -0.20% | |
| JPY | -0.34% | 0.00% | 0.02% | -0.31% | 0.03% | -0.23% | -0.27% | |
| CAD | -0.01% | 0.33% | 0.23% | 0.31% | 0.32% | 0.07% | 0.03% | |
| AUD | -0.36% | -0.03% | -0.14% | -0.03% | -0.32% | -0.33% | -0.34% | |
| NZD | -0.08% | 0.29% | 0.19% | 0.23% | -0.07% | 0.33% | -0.04% | |
| CHF | -0.07% | 0.26% | 0.20% | 0.27% | -0.03% | 0.34% | 0.04% |
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) held its ground on Monday and caused EUR/USD to stretch lower as markets turned risk-averse.
Headlines coming out of the meeting between United States (US) President Donald Trump and Ukrainian President Volodymyr Zelenskyy helped the risk mood improve early Tuesday and allowed EUR/USD to gain traction.
Zelenskyy said that they have discussed security guarantees for Ukraine with Trump and European leaders and adding that they are ready to meet with Russian President Vladimir Putin. US Secretary of State Marco Rubio reaffirmed these remarks, noting they will work with European allies and non-European countries on providing security guarantees.
In the European session, US stock index futures trade flat on the day. In the absence of high-tier data releases, a bullish opening in Wall Street could make it difficult for the USD to gather strength and support EUR/USD. Conversely, the pair could lose its traction if markets cling to a cautious stance.
On Wednesday, the Federal Reserve (Fed) will release the minutes of the July policy meeting. Later in the week, Fed Chairman Jerome Powell will deliver a speech at the Jackson Hole Symposium.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50 and EUR/USD continues to fluctuate at around the 20-period and the 50-period Simple Moving Averages (SMAs), highlighting a neutral stance.
On the downside, 1.1650, where the 200-period SMA meets the Fibonacci 23.6% retracement of the latest uptrend, remains intact as support. The 20-day SMA and the 50-day SMA also reinforce that level. In case EUR/USD falls below 1.1650 and confirms it as resistance, technical sellers could take action. In this scenario, 1.1610-1.1600 (100-period SMA, round level) could be seen as the next support level before 1.1540 (Fibonacci 38.2% retracement) and 1.1500 (static level, round level).
On the other hand, technical buyers could show interest in case 1.1650 continues to hold as support. Looking north, resistance levels could be seen at 1.1720 (static level), 1.1760 (static level) and 1.1800 (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.
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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.
