EUR/USD Forecast: Sideways action continues after ambiguous ECB
- EUR/USD continues to fluctuate at around 1.1800 on Friday.
- The ECB left key rates unchanged after the February meeting.
- The US economic calendar will feature consumer sentiment data for February.
EUR/USD found support after closing marginally lower on Thursday and recovered to the 1.1800 area on Friday. Improving risk mood could help the pair hold its ground in the near term.
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 | 0.48% | 0.86% | 1.29% | 0.60% | -0.29% | 0.47% | 0.74% | |
| EUR | -0.48% | 0.34% | 0.83% | 0.11% | -0.78% | -0.01% | 0.26% | |
| GBP | -0.86% | -0.34% | 0.38% | -0.22% | -1.11% | -0.35% | -0.08% | |
| JPY | -1.29% | -0.83% | -0.38% | -0.68% | -1.59% | -0.79% | -0.81% | |
| CAD | -0.60% | -0.11% | 0.22% | 0.68% | -0.86% | -0.12% | 0.14% | |
| AUD | 0.29% | 0.78% | 1.11% | 1.59% | 0.86% | 0.77% | 1.04% | |
| NZD | -0.47% | 0.00% | 0.35% | 0.79% | 0.12% | -0.77% | 0.27% | |
| CHF | -0.74% | -0.26% | 0.08% | 0.81% | -0.14% | -1.04% | -0.27% |
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 European Central Bank (ECB) left key rates unchanged after the February meeting, as expected. In the press conference, ECB President Christine Lagarde noted that a stronger Euro (EUR) could bring inflation down more than expected. Although Lagarde added that they don't have a target for the Euro exchange rate, she noted that they will continue to keep a close eye on the situation.
Early Friday, several ECB policymakers crossed the wires. Policymaker Jose Luis Escriva said that inflation expectations are anchored and added "everything points to the best course of action at this time being to maintain stable interest rates." On a more dovish note, Policymaker Olli Rehn said that there is a real risk of "lower-than-expected inflation," and French central bank chief Francois Villeroy de Galhau noted that further apprecation in the Euro would translate into even lower inflation.
In the second half of the day, the University of Michigan will publish the preliminary US Consumer Sentiment Index data for February. Meanwhile, US stock index futures were last seen gaining between 0.2% and 0.4% after spending the early trading hours of the European session in negative territory. A bullish opening in Wall Street and a decisive recovery in major equity indexes in the US could make it difficult for the USD to gather strength and help EUR/USD edge higher heading into the weekend.
EUR/USD Technical Analysis:
The 20-period Simple Moving Average (SMA) slides beneath the 50-period and both turn lower, keeping near-term bias under pressure. The 100- and 200-period SMAs edge higher, with price holding above them but capped below the shorter averages. The Relative Strength Index (RSI) prints at 43, below the midline, reinforcing subdued momentum.
Measured from the 1.1590 low to the 1.2025 high, the 50% retracement at 1.1808 aligns as an immediate resistance level ahead of 1.1860-1.1870, where the Fibonacci 38.2% retracement level and the 50-period SMA meet. On the downside, 1.1750-1.1755 (200-period SMA, Fibonacci 61.8% retracement) could be seen as a key support level before 1.1680 (Fibonacci 78.6% retracement).
(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.
