EUR/USD Forecast: Euro stabilizes but remains fragile
- EUR/USD holds steady near 1.0650 following the previous week's sharp decline.
- Investors pay close attention to geopolitical headlines on Monday.
- An improving risk mood could help the pair correct higher.
EUR/USD fell 1.8% in the previous week and registered its biggest one-week loss since September 2022. The pair holds steady at around 1.0650 in the European session on Monday as market participants await macroeconomic data releases from the US, while keeping a close eye on geopolitical developments.
Growing fears over an escalation of geopolitical tensions over the weekend, with Iran looking to launch an attack on Israel, triggered a flight to safety late Friday. The US Dollar (USD) benefited from safe-haven flows and EUR/USD fell 0.8% on a daily basis.
Euro price in the last 7 days
The table below shows the percentage change of Euro (EUR) against listed major currencies in the last 7 days. Euro was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.57% | 1.10% | 0.99% | 1.28% | 1.45% | 1.07% | 1.08% | |
| EUR | -1.59% | -0.47% | -0.58% | -0.28% | -0.11% | -0.48% | -0.49% | |
| GBP | -1.12% | 0.47% | -0.11% | 0.19% | 0.35% | -0.03% | -0.05% | |
| CAD | -1.01% | 0.56% | 0.10% | 0.29% | 0.46% | 0.07% | 0.08% | |
| AUD | -1.30% | 0.28% | -0.19% | -0.30% | 0.17% | -0.20% | -0.22% | |
| JPY | -1.49% | 0.11% | -0.33% | -0.48% | -0.17% | -0.36% | -0.40% | |
| NZD | -1.08% | 0.48% | 0.03% | -0.09% | 0.22% | 0.37% | -0.03% | |
| CHF | -1.09% | 0.51% | 0.04% | -0.07% | 0.23% | 0.40% | 0.01% |
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 Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Late Saturday, Iran launched an assault with more than 300 drones and missiles in retaliation to the suspected Israeli attack on Iran’s consulate in Damascus on April 1. Israeli military spokesman Rear Admiral Daniel Hagari said in a televised statement that none of the cruise missiles and drones entered Israeli territory, while a small number of 110 ballistic missiles reached Israel.
Early Monday, the market mood seems to have improved as investors remain optimistic about Israel refraining from launching a counter-offensive against Iran. At the time of press, US stock index futures were up between 0.4% and 0.5%. In case risk flows return with a bullish opening in Wall Street, the USD could struggle to find demand and help EUR/USD stage a correction.
The US economic docket will feature Retail Sales data for March. Investors are likely to ignore this data and stay focused on geopolitical headlines.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 30, suggesting that EUR/USD remains technically oversold. On the upside, 1.0700 (static level) aligns as next resistance before 1.0750 (static level) and 1.0790 (50-period Simple Moving Average (SMA), 100-period SMA).
Interim support seems to have formed at 1.0640 before 1.0600 (static level, psychological level) and 1.0550 (static level from October).
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.
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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.
