EUR/USD Forecast: Euro sellers show interest ahead of key US inflation data
- EUR/USD edges lower to the 1.1850 area early Friday.
- Markets await January inflation data from the US.
- The technical outlook highlights increasing sellers interes in the short term.
EUR/USD stays on the back foor and trades in negative territory near 1.1850 in the early European session on Friday after closing flat on Thursday. The pair's near-term technical outlook hints at a bearish tils as market focus shifts to January inflation data from the US.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.36% | -0.14% | -2.62% | -0.33% | -0.72% | -0.17% | -0.82% | |
| EUR | 0.36% | 0.23% | -2.33% | 0.03% | -0.36% | 0.19% | -0.47% | |
| GBP | 0.14% | -0.23% | -2.23% | -0.20% | -0.59% | -0.03% | -0.69% | |
| JPY | 2.62% | 2.33% | 2.23% | 2.40% | 2.00% | 2.58% | 1.78% | |
| CAD | 0.33% | -0.03% | 0.20% | -2.40% | -0.29% | 0.17% | -0.50% | |
| AUD | 0.72% | 0.36% | 0.59% | -2.00% | 0.29% | 0.56% | -0.11% | |
| NZD | 0.17% | -0.19% | 0.03% | -2.58% | -0.17% | -0.56% | -0.66% | |
| CHF | 0.82% | 0.47% | 0.69% | -1.78% | 0.50% | 0.11% | 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).
The bearish action seen in Wall Street's main indexes helped the US Dollar (USD) find demand as a safe haven in the American session on Thursday and made it difficult for EUR/USD to edge higher.
Early Friday, US stock index futures lose about 0.2% on the day, while the USD Index, which tracks the USD's performance against a basket of six major currencies, clings to moderate daily gains above 97.00.
Meanwhile, the Financial Times reported, citing people familiar with discussions, that US President Donald Trump was planning to roll back some tariffs on steel and aluminium. In case market mood improves on this headline, the USD could struggle to preserve its strength.
The US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for January later in the day. Investors expect the headline annual CPI inflation to soften to 2.5% from 2.7% in December. The core CPI, which excludes volatile food and energy prices, is seen rising 0.3% on a monthly basis, following the 0.2% increase recorded in December.
In case the monthly core CPI rises more than expected, the USD could outperform its peers with the immediate reaction and cause EUR/USD to stretch lower. On the other hand, a reading below analysts' estimate could limit the USD's gains and help the pair hold its ground heading into the weekend.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1853. The 20-period Simple Moving Average (SMA) turns lower above the 50- and 100-period SMAs, while the 100- and 200-period SMAs extend a gentle rise. The Relative Strength Index (RSI) prints at 44, pointing to waning momentum.
Measured from the 1.1590 low to the 1.2025 high, the 50% retracement at 1.1808 offers initial support, with the 61.8% at 1.1756 underpinning on deeper pullbacks. On the topside, if EUR/USD manages to stabilize above the 100 SMA at 1.1854, it could stage a rebound toward the 20 SMA at 1.1888. Failure to base above this support would leave the pair vulnerable to further losses.
(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.
