EUR/USD Forecast: Euro retreats after Trump backs away from EU tariffs
- EUR/USD trades in a tight channel slightly below 1.1700 on Thursday.
- The technical outlook points to a loss of bullish momentum.
- US President Donald Trump announced that he will not impose tariffs on European nations.
EUR/USD lost its traction on Wednesday and closed in negative territory after touching a three-week high near 1.1770 on Tuesday. In the European session on Thursday, the pair trades in a narrow channel below 1.1700.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.89% | -0.50% | 0.64% | -0.66% | -1.92% | -2.07% | -0.89% | |
| EUR | 0.89% | 0.40% | 1.52% | 0.23% | -1.05% | -1.19% | -0.01% | |
| GBP | 0.50% | -0.40% | 0.89% | -0.17% | -1.46% | -1.58% | -0.40% | |
| JPY | -0.64% | -1.52% | -0.89% | -1.27% | -2.52% | -2.65% | -1.49% | |
| CAD | 0.66% | -0.23% | 0.17% | 1.27% | -1.24% | -1.39% | -0.24% | |
| AUD | 1.92% | 1.05% | 1.46% | 2.52% | 1.24% | -0.14% | 1.05% | |
| NZD | 2.07% | 1.19% | 1.58% | 2.65% | 1.39% | 0.14% | 1.20% | |
| CHF | 0.89% | 0.00% | 0.40% | 1.49% | 0.24% | -1.05% | -1.20% |
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) staged a rebound in the American session on Wednesday and caused EUR/USD to stretch lower.
During his speech at the World Economic Forum in Davos, US President Donald Trump said that they won't use force to take Greenland and reiterated that they can't defend Greenland on a lease. Later in the day, Trump announced on Truth Social that they have agreed on "the framework of a future deal with respect to Greenland" and added that they will not be imposing tariffs on eight European nations that were scheduled to go into effect on February 1.
The market mood remains upbeat in the European session on Thursday with US stock index futures rising between 0.4% and 0.8% on the day. While the risk-positive atmosphere helps EUR/USD hold its ground, the USD stays resilient and doesn't allow the pair to gain traction.
In the second half of the day, the US economic calendar will feature Personal Consumption Expenditures (PCE) Price Index data for October and November, which are unlikely to trigger a market reaction. Additionally, the US Bureau of Economic Analysis will release its second estimate of the third-quarter Gross Domestic Product (GDP) data. A positive revision to the GDP print could support the USD with the immediate reaction.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1692. The 20-period Simple Moving Average (SMA) climbs above the 50 and 100 SMAs, and price trades above them. RSI at 55 (neutral) ticks higher, aligning with improving near-term momentum.
Measured from the 1.1800 high to the 1.1585 low, the Fibonacci retracement map assigns resistance on rebounds. The 50% retracement at 1.1692 aligns as the immediate hurdle just before the 200-period SMA near 1.1700 and the 61.8% retracement at 1.1718. A firm break above those barriers could open the door for an extended rebound toward 1.1755 (Fibonacci 78.6% retracement). On the downside, the 100-period SMA at 1.1680 could be seen as the first support level before 1.1665 (Fibonacci 38.2% retracement) and 1.1655 (50-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.
