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EUR/USD Price Forecast: Bulls hold control above key SMAs, 1.2000 in focus

  • EUR/USD trades at one-week highs on broad Greenback weakness.
  • The Euro remains supported above key moving averages, keeping the near-term bias positive.
  • Traders look to the 1.2000 handle as the next key test for bulls.

The Euro (EUR) edges higher against the US Dollar (USD) on Monday, with EUR/USD climbing to one-week highs, as broad-based weakness in the Greenback continues to dominate price action. At the time of writing, the pair is trading around 1.1910, up nearly 0.74% on the day.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading near six-day lows around 96.98, extending its decline for a second straight day.

From a technical perspective, the daily chart shows EUR/USD stabilising above its key moving averages. The 21-day Simple Moving Averages (SMA) has crossed above the 50- and 100-day SMAs, confirming a constructive bullish alignment, while all three averages continue to slope higher. The 21-day SMA at 1.1780 now acts as the first layer of dynamic support.

Price action also remains encouraging after breaking above a multi-month consolidation range in late January, with the pair now successfully retesting and rebounding near the former upper boundary of that range, turning previous resistance into support.

On the upside, the 1.2000 psychological handle and the January 27 high at 1.2082 form a near-term resistance zone. A decisive daily close above this area would confirm a fresh bullish breakout and open the door for a deeper upside extension.

On the downside, as long as EUR/USD holds above its key moving averages and the upper boundary of the former consolidation range, the broader technical outlook remains constructive, with the 100-day SMA at 1.1678 acting as a strong support zone.

Momentum indicators remain supportive, with the Relative Strength Index (RSI) holding near 60, while the Average Directional Index (ADX) around 32 points to a strengthening underlying trend.

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

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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