EUR/USD Forecast: Euro remains fragile as markets await EU-US trade news
- EUR/USD struggles to find direction, moves sideways below 1.1750.
- Markets await clarity on the EU-US trade relations.
- Weekly Initial Jobless Claims data will be featured in the US economic calendar.
EUR/USD continues to move up and down in a narrow channel below 1.1750 after closing virtually unchanged on Wednesday. The pair's technical outlook fails to offer a directional clue as market participants await news on EU-US trade relations.
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 | 0.44% | 0.35% | 1.43% | 0.61% | -0.04% | 0.66% | 0.14% | |
| EUR | -0.44% | -0.08% | 0.74% | 0.14% | -0.42% | 0.21% | -0.31% | |
| GBP | -0.35% | 0.08% | 0.80% | 0.25% | -0.33% | 0.30% | -0.36% | |
| JPY | -1.43% | -0.74% | -0.80% | -0.59% | -1.23% | -0.53% | -1.21% | |
| CAD | -0.61% | -0.14% | -0.25% | 0.59% | -0.62% | 0.06% | -0.60% | |
| AUD | 0.04% | 0.42% | 0.33% | 1.23% | 0.62% | 0.74% | -0.02% | |
| NZD | -0.66% | -0.21% | -0.30% | 0.53% | -0.06% | -0.74% | -0.66% | |
| CHF | -0.14% | 0.31% | 0.36% | 1.21% | 0.60% | 0.02% | 0.66% |
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 shared a new set of tariff letters on Wednesday, which outlined rates that will be imposed on Libya, Iraq, Algeria, Philippines and some other minor trading partners.
Trump is yet to unveil how trade policy with the EU will be set. European Commission President Ursula von der Leyen said on Thursday they are working "non-stop" to reach an agreement with the US "to keep tariffs as low as possible and to provide the stability that businesses need."
Later in the day, the US Department of Labor will release the weekly Initial Jobless Claims data. A significant decline, with a reading below 220,000, could provide a boost to the US Dollar (USD) with the immediate reaction. On the other hand, a reading above 250,000 could hurt the USD and open the door for a rebound in EUR/USD. Nevertheless, the market reaction to this data is likely to remain short-lived, with investors refraining from taking large positions.
In case the US and the EU reach an agreement, EUR/USD could stretch higher in the near term. Conversely, the Euro could have a difficult time attracting buyers if the US unveils tariff rates on the EU imports, suggesting that they have failed to come to terms.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart moves sideways at around 50 and EUR/USD fluctuates between the 20-period and the 50-period Simple Moving Average (SMA), reflecting the pair's indecisiveness.
On the downside, 1.1700-1.1690 (lower limit of the ascending channel, 100-period SMA) aligns as a key support area ahead of 1.1640 (static level) and 1.1600 (static level, round level). Looking north, resistance levels could be seen at 1.1760 (50-period SMA), 1.1800 (round level, static level) and 1.1830 (static 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.
