EUR/USD Forecast: Bulls return to action on renewed USD weakness
- EUR/USD trades at a new multi-month high above 1.0900 on Monday.
- The US Dollar (USD) struggles to find demand ahead of the Fed meeting.
- The technical outlook points to a bullish tilt in the near term.
EUR/USD gains traction and trades at its highest level since early October near 1.0950 on Tuesday, after having closed in positive territory on Monday. The pair's near-term technical outlook highlights a buildup of bullish momentum.
Euro PRICE This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.60% | -0.40% | 0.70% | -0.73% | -0.81% | -1.37% | -0.58% | |
| EUR | 0.60% | 0.09% | 0.93% | -0.12% | -0.33% | -0.78% | 0.00% | |
| GBP | 0.40% | -0.09% | 1.15% | -0.43% | -0.44% | -0.89% | -0.16% | |
| JPY | -0.70% | -0.93% | -1.15% | -1.42% | -1.72% | -2.01% | -1.41% | |
| CAD | 0.73% | 0.12% | 0.43% | 1.42% | -0.29% | -0.65% | -0.39% | |
| AUD | 0.81% | 0.33% | 0.44% | 1.72% | 0.29% | -0.42% | 0.36% | |
| NZD | 1.37% | 0.78% | 0.89% | 2.01% | 0.65% | 0.42% | 0.79% | |
| CHF | 0.58% | -0.00% | 0.16% | 1.41% | 0.39% | -0.36% | -0.79% |
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).
Following a quiet start to the week, the US Dollar (USD) came under selling pressure in the early American session on Monday after the data published by the US Census Bureau showed that Retail Sales rose at a much softer pace than expected in February. Additionally, the bullish opening in Wall Street reflected a positive shift in risk mood, which made it difficult for the USD to hold its ground.
Later in the session, the US economic calendar will feature Housing Starts, Building Permits and Industrial Production data for February.
Industrial Production is forecast to expand by 0.2% on a monthly basis. A negative print could weigh on the USD and help EUR/USD stretch higher. On the flip side, a positive surprise is likely to support the USD with the immediate reaction.
Nevertheless, investors could refrain from betting on a steady recovery in the USD ahead of the Federal Reserve's monetary policy announcements on Wednesday.
EUR/USD Technical Analysis
EUR/USD holds comfortably above the 20-period and the 50-period Simple Moving Averages (SMA) on the 4-hour chart and the Relative Strength Index rises toward 70, pointing to a buildup of bullish momentum. On the upside, 1.1000-1.1010 (round level, mid-point of the ascending regression channel) aligns as first resistance before 1.1100 (round level, static level).
Looking south, supports could be spotted at 1.0900 (static level, round level), 1.0870 (static level, 50-period SMA) and 1.835 (lower limit of the ascending channel).
Euro FAQs
The Euro is the currency for the 19 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.
