EUR/USD Price Forecast: Struggles at 1.1600, dives below 100-day SMA

EUR/USD shifts neutral after clearing six-month downtrend resistance.
Flat bullish RSI suggests upside, but momentum is slowing.
Daily close above 1.1600 exposes 1.1629 and 1.1700.

Christian Borjon Valencia FXStreet

The shared currency clings to minimal gains versus the US Dollar on Monday, edging up by some 0.08% after reaching a month-and-a-half high at 1.1614, then reversing course and falling beneath 1.1600, poised to end the session near the low of the day (LOD) of 1.1561.

EUR/USD Price Forecast: Technical Outlook

After climbing above a six-month-old downslope resistance trendline, EUR/USD has shifted from a downward bias to neutral, consolidating around the 1.1500-1.1600 area. On the upside, it is capped by the 100-day Simple Moving Average (SMA) at 1.1568, which is the first resistance level. If breached, the next area is 1.1600 ahead of challenging the 200-day SMA at 1.1629. The next key resistance is at 1.1650, followed by 1.1700.

On the downside, the EUR/USD might shift back to downwards, if it drops below 1.1500. If cleared, the next stop is the 50-day SMA at 1.1466, which converges with the six-month-old previous resistance trendline, turned support. Once breached, the next stop is 1.1400.

From a momentum standpoint, further upside is seen. The Relative Strength Index (RSI) is bullish, though it has turned flattish.

Given the backdrop, the EUR/USD might be poised to retest 1.1600. Failure to close above that level on a daily basis opens the door to a false breakout and could exacerbate a pullback toward lower price targets.

EUR/USD Price Chart – Daily

Euro FAQs

What is the Euro?

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%).

What is the ECB and how does it impact the Euro?

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.

How does inflation data impact the value of the Euro?

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.

How does economic data influence the value of the Euro?

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.

How does the Trade Balance impact the Euro?

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

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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