EUR/USD Forecast: Euro stabilizes but looks fragile
- EUR/USD consolidates weekly losses near 1.1800 in the European session on Thursday.
- The near-term technical outlook suggests that the bearish bias stays intact.
- The US Dollar benefited from the hawkish tone seen in FOMC Minutes on Wednesday.
EUR/USD came under bearish pressure in the second half of the day on Wednesday and declined to the 1.1780 area to close with a daily loss of about 0.6%. Early Thursday, the pair corrects higher and hold steady at around 1.1800.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.56% | 0.96% | 1.42% | 0.46% | -0.02% | 0.74% | 0.51% | |
| EUR | -0.56% | 0.40% | 0.86% | -0.10% | -0.59% | 0.18% | -0.05% | |
| GBP | -0.96% | -0.40% | 0.19% | -0.50% | -0.99% | -0.21% | -0.44% | |
| JPY | -1.42% | -0.86% | -0.19% | -0.96% | -1.41% | -0.67% | -0.86% | |
| CAD | -0.46% | 0.10% | 0.50% | 0.96% | -0.52% | 0.29% | 0.05% | |
| AUD | 0.02% | 0.59% | 0.99% | 1.41% | 0.52% | 0.78% | 0.54% | |
| NZD | -0.74% | -0.18% | 0.21% | 0.67% | -0.29% | -0.78% | -0.23% | |
| CHF | -0.51% | 0.05% | 0.44% | 0.86% | -0.05% | -0.54% | 0.23% |
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) gathered strength in the late American session on Wednesday as the minutes of the Federal Reserve's (Fed) January policy meeting offered some hawkish surprises.
The Fed's publication showed that the Committee made it clear that it is not operating with a one-way bias. According to the document, several policymakers noted that they would have supported describing future decisions in more two-sided terms, reflecting the possibility that hikes could be appropriate if inflation remained above target.
Commenting on FOMC Minutes, "the minutes had a hawkish twist as 'several participants' suggested that the bank may need to raise interest rates if inflation stays above the target," Danske Bank analysts said and added they expect the Fed to leave the policy rate unchanged in March, followed by cuts in June and September.
The US economic calendar will feature weekly Initial Jobless Claims data on Thursday. Investors expect the data to arrive at 225K. A reading below 210K could boost the USD and cause EUR/USD to extend its weekly slide. On the other hand, a disappointing print above 230K could have the opposite impact on the pair's action.
Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1801. The 20-period Simple Moving Average (SMA) slopes lower beneath the 50- and 100-period SMAs, and price holds below these short- and medium-term references, keeping the intraday bias weak. The Relative Strength Index (RSI) sits at 37, below the 50 midline, suggesting that the bearish bias remains intact after a brief recovery from oversold readings.
Measured from the 1.1590 low to the 1.2027 high, the 50% retracement at 1.1809 aligns as pivot level. A sustained break below this support could expose the 200-period SMA at 1.1780 before the 61.8% retracement at 1.1757. Recovery attempts would face initial resistance at the 20-period SMA near 1.1830, and a close back above that mark would ease pressure and improve the tone, opening the door for a recovery toward the 38.2% retracement at 1.1860.
(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.
