EUR/USD Price Forecast: Holds steady below 1.1700 as overbought momentum tempers further gains
- EUR/USD flatlines around 1.1680 in Monday’s early European session.
- The pair maintains a constructive tone, but a temporary sell-off or consolidation cannot be ruled out amid overbought RSI momentum.
- The first upside barrier emerges at 1.1705; the initial support level is seen at 1.1575.
The EUR/USD pair holds steady near 1.1680 during the early European trading hours on Monday. Fiscal interventions from the US Treasury weigh on the US Dollar (USD) against the Euro (EUR). Traders brace for details of sanctions on Iran and a policy speech this week in the United States (US).
US Treasury Secretary Scott Bessent said on Thursday that it would double its long-end bond buybacks to $4 billion per operation to cap surging 30-year yields. The announcement came one day after the department said it will pledge to at least double the size of its buybacks of longer-dated debt in an effort to rein in bond yields.
Traders are concerned over the deteriorating fiscal outlook and uncertainty over the Federal Reserve's (Fed) policy path. This, in turn, exerts some selling pressure on the Greenback.
Bessent is scheduled to hold a press conference on Monday at 18:00 GMT after threatening "the toughest sanctions in history" on Iran, with markets focused on whether he will target China. Iran's Foreign Minister Abbas Araghchi dismissed the threat of a fresh round of US economic sanctions as a “desperate” ploy and said the expected new measures would fail to defeat Tehran, per Reuters. Ongoing tensions between the US and Iran could trigger safe-haven flows back into the Greenback.
On Friday, the attention will shift to the speech from Fed Chairman Kevin Warsh in Jackson Hole, Wyoming, for some clarity on the outlook for US interest rates. Any hawkish comments from Fed officials might help limit the USD’s losses.
Euro-Dollar traders eye Warsh tone as potential hawkish risk
Commerzbank’s analysts caution that policy communication remains a key driver for EUR-USD in the near term, highlighting that “one risk for the EUR-USD is therefore certainly that Warsh will sound more hawkish than expected on Friday.” They argue that a firmer-than-anticipated stance from the Fed official at Jackson Hole could unsettle current Dollar sentiment and inject renewed volatility into the Euro-Dollar exchange rate.
Technical Analysis: EUR/USD keeps a bullish vibe in the near term amid overbought RSI momentum
In the daily chart, EUR/USD maintains a bullish near-term bias as spot holds above the 20-day Bollinger middle band and the 100-day simple moving average (SMA). Price is pressing into the upper area of the recent range and sits just under the Bollinger upper band, while the Relative Strength Index (14) around 73 suggests overbought conditions that could temper immediate upside despite the supportive structure.
On the topside, initial resistance is located at the Bollinger upper band at 1.1705, where buyers may face profit-taking. On the downside, support is seen first at the 100-day SMA near 1.1575, followed by the 20-day Bollinger middle band at 1.1558, with a deeper structural floor at the lower Bollinger band close to 1.1415.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
