EUR/USD Forecast: Euro reverses direction after meeting strong resistance
- EUR/USD declines toward 1.0450 in the European morning on Monday.
- The Fed and the ECB will announce monetary policy decisions later this week.
- The technical outlook points to a loss of bullish momentum in the near term.
EUR/USD stays under bearish pressure early Monday and retreats toward 1.0450 after posting impressive gains in the previous week.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.32% | 0.35% | 0.16% | 0.24% | 0.54% | 0.48% | 0.14% | |
| EUR | -0.32% | 0.11% | -0.03% | 0.06% | 0.23% | 0.29% | -0.08% | |
| GBP | -0.35% | -0.11% | -0.45% | -0.04% | 0.12% | 0.20% | -0.18% | |
| JPY | -0.16% | 0.03% | 0.45% | 0.14% | 0.57% | 0.57% | 0.13% | |
| CAD | -0.24% | -0.06% | 0.04% | -0.14% | 0.10% | 0.24% | -0.14% | |
| AUD | -0.54% | -0.23% | -0.12% | -0.57% | -0.10% | 0.09% | -0.27% | |
| NZD | -0.48% | -0.29% | -0.20% | -0.57% | -0.24% | -0.09% | -0.59% | |
| CHF | -0.14% | 0.08% | 0.18% | -0.13% | 0.14% | 0.27% | 0.59% |
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 negative seen in risk sentiment at the beginning of the week helps the US Dollar (USD) stay resilient against its major rivals and makes it difficult for the Euro (EUR) to hold its ground. US stock index futures trade deep in negative territory amid a selloff in technology stocks in premarket trading, reflecting the risk-averse atmosphere. Reports of China's DeepSeek AI model outperforming Meta’s Llama 3.1, OpenAI’s GPT-4o and Anthropic’s Claude Sonnet 3.5 seem to be forcing markets to adopt a cautious stance.
IFO - Business Climate and IFO - Current Assessment data from Germany will be featured in the European economic docket. Later in the day, Chicago Fed National Activity Index and New Home Sales data from the US will be watched closely by market participants.
Investors are unlikely to take large positions based on these data because the Federal Reserve and the European Central Bank will announce monetary policy decisions on Wednesday and Thursday, respectively.
In the meantime, EUR/USD could stay on the back foot if Wall Street's main indexes open in the red and continue to stretch lower.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart declines toward 60, reflecting a loss of bullish momentum. EUR/USD could face next support at 1.0440 (Fibonacci 61.8% retracement of the latest downtrend) before 1.0390-1.0400 (200-period Simple Moving Average, Fibonacci 50% retracement) and 1.0340-1.0350 (Fibonacci 38.2% retracement, 100-period SMA).
On the upside, strong resistance aligns at 1.0500-1.0510 (round level, Fibonacci 78.6% retracement) before 1.0540 (static level) and 1.0600 (beginning point of the downtrend).
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.
