EUR/USD Forecast: Sellers retain control despite oversold conditions
- EUR/USD stays under bearish pressure after closing in the red on Monday.
- The near-term technical outlook points to oversold conditions.
- Investors will focus on the Middle East crisis and comments from central bankers.
EUR/USD extends its slide after closing deep in negative territory on Monday and closes in on 1.1600. The risk-averse market atmosphere could make it difficult for the pair to stage a rebound, despite technically oversold conditions.
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 | 1.23% | 0.82% | 0.99% | 0.36% | -0.15% | 0.84% | 2.22% | |
| EUR | -1.23% | -0.41% | -0.27% | -0.86% | -1.36% | -0.38% | 0.97% | |
| GBP | -0.82% | 0.41% | -0.06% | -0.45% | -0.96% | 0.03% | 1.38% | |
| JPY | -0.99% | 0.27% | 0.06% | -0.57% | -1.09% | -0.04% | 1.25% | |
| CAD | -0.36% | 0.86% | 0.45% | 0.57% | -0.55% | 0.54% | 1.85% | |
| AUD | 0.15% | 1.36% | 0.96% | 1.09% | 0.55% | 0.99% | 2.37% | |
| NZD | -0.84% | 0.38% | -0.03% | 0.04% | -0.54% | -0.99% | 1.37% | |
| CHF | -2.22% | -0.97% | -1.38% | -1.25% | -1.85% | -2.37% | -1.37% |
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) capitalized on safe-haven flows at the beginning of the week and caused EUR/USD to push lower as markets reacted to the US and Israel carrying out a joint military operation against Iran. Reflecting the broad-based USD strength, the USD Index gained nearly 1% on a daily basis on Monday.
Early Tuesday, US stock index futures are down more than 1% on the day and the Euro Stoxx 50 Index loses about 2.3%. In turn, the USD Index preserves its bullish momentum and trades at its highest level since late January above 99.00.
US military officials said early Tuesday that they have destroyed command posts of Iran’s Revolutionary Guards, as well as Iranian air defense and missile launch sites since the start of the joint offensive on Saturday. Meanwhile, Iran fired missiles and drones at several Persian Gulf countries, including a drone strike that hit the US Embassy in Saudi Arabia’s capital, Riyadh. US President Donald Trump said that he doesn't think "boots on the ground" will be necessary and added that the US will soon respond to the attack on the US embassy in Riyadh soon.
The European economic calendar will feature the preliminary Harmonized Index of Consumer Prices (HICP) data for February, which is unlikely to trigger a market reaction.
Later in the day, policymakers from the European Central Bank (ECB) and the Federal Reserve (Fed) will be delivering speeches.
ECB chief economist Philip Lane said early Tuesday that a prolonged conflict in the Middle East could lead to a substantial spike in inflation and also cause a sharp drop in output in the Euro Area. Additionally, ECB policymaker Martin Kocher told the Wall Street Journal on Monday that the ECB should be prepared to move interest rates quickly in either direction. In case ECB officials voice concerns over upside risks to inflation, the Euro could find a foothold in the near term and help EUR/USD limit its losses.
In the meantime, markets seem to be assessing the uncertainty created by the Middle East crisis as a factor that could cause the Fed to delay policy-easing. According to the CME FedWatch Tool, the probability of a Fed rate cut in June declined to about 36% from nearly 46% on Friday. Hence, the USD could continue to outperform its rivals if Fed policymakers hint that they would prefer to remain patient until they have a better understanding of the potential impact of the US-Iran war on inflation and the broad economic outlook.
EUR/USD Technical Analysis:
In the 4-hour chart, EUR/USD trades at 1.1635. The near-term bias is bearish as the pair holds below the 20-, 50- and 100-period Simple Moving Averages (SMAs), while the 50- and 100-period SMAs cap price beneath the gently rising 200-period SMA near 1.1805, signalling persistent downside pressure within a broader consolidation. The Relative Strength Index (RSI) sits near 26, in oversold territory, which reflects strong selling momentum but also warns that further declines would stretch the move. Price has slipped beneath the 61.8% Fibonacci retracement at 1.1757, measured from the 1.1590 low to the 1.2027 high, reinforcing the corrective slide from the upper range.
Immediate resistance now appears at the 61.8% retracement at 1.1757, followed by the 50% retracement at 1.1809, where the cluster of SMAs around 1.1780–1.1820 forms a broader supply zone that would need to break to ease the bearish tone. On the downside, support is seen at the recent Fibonacci anchor low at 1.1590, ahead of the horizontal levels at 1.1540 and 1.1500, which guard deeper losses. A sustained break below 1.1590 would open the path toward 1.1540, while recovery attempts below 1.1757 are expected to face selling interest.
(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.
