|

EUR/USD Forecast: Euro stabilizes but could struggle to attract buyers

  • EUR/USD holds steady at around 1.0850 in the European session on Friday.
  • The technical outlook shows no signs of a buildup in directional momentum.
  • UoM Consumer Sentiment Index data will be featured in the US economic calendar.

EUR/USD seems to have entered a consolidation phase at around 1.0850 after closing the previous two days in negative territory. The pair's near-term technical outlook fails to provide a directional clue.

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 New Zealand Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD -0.16%-0.01%0.66%0.37%0.05%-0.05%0.51%
EUR0.16% 0.11%0.79%0.54%0.29%0.09%0.55%
GBP0.01%-0.11% 0.63%0.41%0.18%-0.07%0.52%
JPY-0.66%-0.79%-0.63% -0.28%-0.54%-0.77%-0.06%
CAD-0.37%-0.54%-0.41%0.28% -0.37%-0.42%0.11%
AUD-0.05%-0.29%-0.18%0.54%0.37% -0.20%0.32%
NZD0.05%-0.09%0.07%0.77%0.42%0.20% 0.64%
CHF-0.51%-0.55%-0.52%0.06%-0.11%-0.32%-0.64% 

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) held its ground on Thursday as safe-haven flows continued to dominate the action in financial markets. Additionally, the data published by the US Department of Labor showed that the number of first-time applications for unemployment benefits declined slightly to 220,000 from 222,000 in the previous week.

Meanwhile, US President Donald Trump said in a social media post on Thursday that he would seek to impose 200% tariffs on European wine and champagne imports. In response, French Finance Minister Eric Lombard said Trump's threat to augment tariffs on French liquor imports were not surprising and called his actions an "idiotic war."

In the second half of the day, the University of Michigan will publish the preliminary Consumer Sentiment Index data for March. A noticeable deterioration in consumer confidence could hurt the USD ahead of the weekend and help EUR/USD keep its footing. 

Investors could also react to changes in risk perception. At the time of press, US stock index futures were up between 0.6% and 1%. A bullish action in Wall Street could make it difficult for the USD to outperform its rivals and open the door for a rebound in EUR/USD. 

EUR/USD Technical Analysis

EUR/USD retreated below the lower limit of the ascending regression channel and the Relative Strength Index fell slightly below 50, reflecting a lack of buyer interest. On the downside, 1.0800 (static level, round level) could be seen as next support before 1.0730 (200-day SMA). 

In case EUR/USD holds steady above 1.0850 (static level), it could face next resistance at 1.0900 (round level, static level) ahead of 1.0940 (static level).

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.

Author

Eren Sengezer

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.

More from Eren Sengezer
Share:

Editor's Picks

AUD/USD bulls seem hesitant below 0.7050 ahead of RBA on Tuesday

AUD/USD reverses an Asian session dip on Monday as renewed optimism over Iran diplomacy boosts investor confidence, keeping a lid on the safe-haven US Dollar and supporting the risk-sensitive Aussie. Spot prices, however, remain below the one-month high, touched last Thursday, as bulls wait for the crucial RBA decision before taking fresh positions.



USD/JPY climbs to 158.00 neighborhood as BoJ uncertainty weighs on the JPY

The USD/JPY pair gains some positive traction at the start of a new week, recovering further from Friday's post-Bank of Japan (BoJ) swing low to sub-157.00 levels. The momentum lifts spot prices to the 158.00 neighborhood during the Asian session and seems unaffected by fresh intervention warning from Japan's Finance Minister Satsuki Katayama.

Gold trims intraday gains; trades below $3,900 as Fed hike bets counter weak USD

Gold trims part of its modest intraday gains, trading with a mild positive bias below the $3,900 mark during Monday’s early European session. The US Dollar attracts fresh sellers amid optimism over a potential diplomatic breakthrough to end the US-Iran war and offers some support to the commodity. Meanwhile, US Federal Reserve rate-hike bets remain firmly on the table amid energy-driven inflation concerns, keeping the non-yielding yellow metal near the October 2025 low touched on Friday.

Dogecoin risks deeper slide as whales diverge

Dogecoin hovers around $0.075 on Monday after falling for the fifth consecutive week since the end of September. Santiment data shows diverging whale activity, as large holders reduce their positions while smaller whale wallets accumulate tokens. Meanwhile, weakening on-chain metrics and a deteriorating technical outlook suggest that DOGE could remain vulnerable to further losses.

Middle East War updates: Iran warns of expanded strikes against US despite progress in talks

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.