EUR/USD Forecast: Euro struggles to rebound as Middle East crisis deepens
- EUR/USD trades near 1.1600 following a two-day slide.
- The technical outlook points to a bearish bias, with oversold conditions.
- The US economic calendar will feature private sector employment and ISM Services PMI data.
EUR/USD remained under heavy bearish pressure for the second consecutive day on Tuesday and closed deep in negative territory. Following a short-lasting recovery attempt in the Asian trading hours on Wednesday, the pair struggles to hold its ground and trades at around 1.1600 in the European session.
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 US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.45% | 0.60% | 0.90% | 0.23% | 0.46% | 0.93% | 1.93% | |
| EUR | -1.45% | -0.86% | -0.53% | -1.20% | -0.98% | -0.50% | 0.47% | |
| GBP | -0.60% | 0.86% | 0.13% | -0.36% | -0.13% | 0.35% | 1.33% | |
| JPY | -0.90% | 0.53% | -0.13% | -0.62% | -0.40% | 0.13% | 1.04% | |
| CAD | -0.23% | 1.20% | 0.36% | 0.62% | 0.19% | 0.76% | 1.69% | |
| AUD | -0.46% | 0.98% | 0.13% | 0.40% | -0.19% | 0.47% | 1.46% | |
| NZD | -0.93% | 0.50% | -0.35% | -0.13% | -0.76% | -0.47% | 0.98% | |
| CHF | -1.93% | -0.47% | -1.33% | -1.04% | -1.69% | -1.46% | -0.98% |
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) continued to capitalize on safe-haven flows on Tuesday, causing EUR/USD to push lower. While there are no signs of a de-escalation of the conflict in the Middle East, the USD stays resilient against its peers midweek and makes it difficult for the pair to gain traction.
In the second half of the day, the Automatic Data Processing (ADP) will publish the Employment Change data for February. Additionally, the Institute for Supply Management (ISM) will release the Services Purchasing Managers' Index (PMI) report.
Growing concerns over rising energy prices feeding into inflation causes market participants to price in a further delay in the next Federal Reserve (Fed) interest rate cut. According to the CME FedWatch Tool, the probability of the Fed holding the policy rate steady in the next three meetings climbed above 60% from about 50% in the previous week.
In case the ADP data shows a stronger-than-forecast increase in private sector employment, the USD could continue to gather strength and trigger another leg lower in EUR/USD. On the flip side, a significant decline in either the ADP data or the Employment Index component of the ISM Services PMI could limit the USD's gains and help EUR/USD find a foothold with the immediate reaction.
In the meantime, investors will continue to pay close attention to the action in stock markets. As of writing, US stock index futures were down between 0.25% and 0.4% on the day. Another risk-off action in Wall Street could support the USD later in the American session and weigh on EUR/USD.
EUR/USD Technical Analysis:
The near-term bias is bearish as the pair holds below the 20- and 50-period Simple Moving Averages (SMAs), while the 100- and 200-period SMAs cap higher around 1.18, reinforcing a downside-skewed backdrop. Price is tracking near the lower Bollinger Band, and the Relative Strength Index (RSI) at 30.4 sits just above oversold territory, signalling persistent selling pressure with only tentative signs of exhaustion. This configuration points to sellers remaining in control, with any rebounds seen as corrective while the price stays beneath the short- and medium-term averages.
Immediate resistance emerges at 1.1651, aligning with a nearby Bollinger mid-band region around 1.17, and a break above this barrier would be needed to ease current downside pressure and open the way toward the 1.17–1.18 congestion where the longer SMAs reside. On the downside, initial support is seen at $1.1531, followed by $1.1500 and then $1.1460, levels that coincide with previous reaction lows and sit well below the lower Bollinger Band zone, where a decisive breach would confirm an extension of the prevailing downtrend.
(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.
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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.
