EUR/USD Forecast: Euro sellers hesitate ahead of key data releases
- EUR/USD stabilizes above 1.1800 ahead of Eurozone and US data.
- The technical outlook highlights sellers' hesitancy in the near term.
- Improving market mood could help the pair edge higher.
Following Tuesday's short-lasting recovery, EUR/USD moves sideways in a narrow channel above 1.1800 in the European morning on Wednesday. While investors await key data releases, the technical outlook points to a lack of seller interest.
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 | 0.15% | -0.15% | 0.95% | 0.20% | -1.18% | -0.48% | 0.50% | |
| EUR | -0.15% | -0.35% | 0.83% | 0.04% | -1.34% | -0.63% | 0.35% | |
| GBP | 0.15% | 0.35% | 1.05% | 0.39% | -1.00% | -0.29% | 0.70% | |
| JPY | -0.95% | -0.83% | -1.05% | -0.74% | -2.13% | -1.37% | -0.71% | |
| CAD | -0.20% | -0.04% | -0.39% | 0.74% | -1.35% | -0.65% | 0.31% | |
| AUD | 1.18% | 1.34% | 1.00% | 2.13% | 1.35% | 0.73% | 1.69% | |
| NZD | 0.48% | 0.63% | 0.29% | 1.37% | 0.65% | -0.73% | 0.99% | |
| CHF | -0.50% | -0.35% | -0.70% | 0.71% | -0.31% | -1.69% | -0.99% |
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) remained under modest selling pressure on Tuesday and helped EUR/USD edge higher. After the US House passed a package to end the partial government shutdown later in the day, the USD kept its footing and limited the pair's upside.
On Wednesday, the Eurostat will publish the preliminary Harmonized Index of Consumer Price (HICP), the European Central Bank's (ECB) preferred gauge of inflation, data for January. Markets expect the annual HICP inflation to soften to 1.7% from 1.9% in December. A stronger-than-forecast print could support the Euro and help EUR/USD to build on Tuesday's modest gains. On the other hand, soft reading could have the opposite impact on the pair's action with the immediate reaction.
In the second half of the day, the US economic calendar will feature the Automatic Data Processing's (ADP) Employment Change data and the Institue for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) report for January.
Investors expect employment in the private sector to rise by 48K. A strong reading, above 60K, could boost the USD and weigh on EUR/USD. The ISM Services PMI is seen edging lower to 53.5 from 54.4, with the Employment Index of the survey improving to 52.3 from 52. In case both the headline PMI and the Employment Index come in better than forecast, investors could see that as a sign that could delay the next Federal Reserve rate cut, supporting the USD and dragging the pair lower.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1828. The 20-period Simple Moving Average (SMA) slopes lower and now sits beneath the rising 50-period SMA, flagging fading short-term momentum. The 50-, 100- and 200-period SMAs trend higher, keeping the broader bias positive as price holds below the short-term averages but above the longer ones.
The Relative Strength Index (14) prints at 45, neutral and recovering modestly, suggesting momentum stabilizes but remains below the midline. Measured from the 1.1590 low to the 1.2025 high, the 50% retracement at 1.1807 offers initial support, with the 61.8% retracement at 1.1756 below. On the upside, 1.1858 (Fibonacci 38.2% retracement) could act as the first resistance level before 1.1880 (50-period SMA) and 1.1920 (Fibonacci 23.6% retracement).
(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.
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