EUR/USD Forecast: Euro remains fragile near key support level
- EUR/USD trades in a tight range near 1.1100 in the European morning on Tuesday.
- Technical sellers could remain interested in case 1.1090-1.1080 support fails.
- The US economic calendar will feature inflation data for April.
EUR/USD enters a consolidation phase after losing nearly 1.5% on Monday and trades in a narrow channel at around 1.1100 in the European session on Tuesday. The pair's technical outlook is yet to point to a buildup of recovery momentum.
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 | 1.27% | 0.73% | 1.11% | 0.65% | 0.16% | 0.61% | 0.71% | |
| EUR | -1.27% | -0.42% | 0.38% | -0.14% | -0.47% | -0.18% | -0.08% | |
| GBP | -0.73% | 0.42% | 0.98% | 0.28% | -0.05% | 0.16% | 0.34% | |
| JPY | -1.11% | -0.38% | -0.98% | -0.47% | -1.56% | -1.35% | -0.62% | |
| CAD | -0.65% | 0.14% | -0.28% | 0.47% | -0.22% | -0.04% | 0.05% | |
| AUD | -0.16% | 0.47% | 0.05% | 1.56% | 0.22% | 0.19% | 0.35% | |
| NZD | -0.61% | 0.18% | -0.16% | 1.35% | 0.04% | -0.19% | 0.07% | |
| CHF | -0.71% | 0.08% | -0.34% | 0.62% | -0.05% | -0.35% | -0.07% |
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 broad-based US Dollar (USD) strength forced EUR/USD to come under heavy bearish pressure at the beginning of the week, as investors cheered the US-China agreement on significantly lowering and pausing reciprocal tariffs for 90 days.
Early Tuesday, US stock index futures trade in negative territory and the USD Index retreats slightly from the monthly high it set on Monday, reflecting a cautious market stance and allowing EUR/USD to hold its ground.
In the second half of the day, the US Bureau of Labor Statistics will publish Consumer Price Index (CPI) data for April. On a monthly basis, the core CPI, which excludes volatile food and energy prices, is expected to rise by 0.3% following the 0.1% increase seen in March. A stronger-than-forecast print could support the USD with the immediate reaction and cause EUR/USD to stretch lower. On the flip side, a soft print of 0.2% or lower could make it difficult for the USD to find demand.
EUR/USD Technical Analysis
EUR/USD trades slightly above the 1.1080-1.1090 area where the 50-day Simple Moving Average (SMA) meets the Fibonacci 61.8% retracement of the latest uptrend. In case the pair drops below this level and starts using it as resistance, technical sellers could take action. In this scenario, 1.1000 (round level, static level) could be seen as the next support level before 1.0950 (Fibonacci 78.6% retracement).
On the upside, resistance levels could be seen at 1.1170 (Fibonacci 50% retracement), 1.1220 (200-period SMA) and 1.1270 (Fibonacci 38.2% retracement).
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.
