EUR/USD Forecast: Euro bulls could remain hesitant on trade war fears
- EUR/USD trades in positive territory above 1.1000 on Wednesday.
- The Fed will release the minutes of the March policy meeting later in the day.
- The near-term technical outlook points to a slightly bullish bias.
EUR/USD benefited from the broad-based selling pressure surrounding the US Dollar (USD) during the Asian trading hours and came within a touching distance of 1.1100. The risk-averse market environment, however, seems to be making it difficult for the pair to preserve its bullish momentum. At the time of press, EUR/USD was trading below 1.1050.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.63% | 0.46% | -0.20% | -0.43% | 0.47% | 0.30% | -1.47% | |
| EUR | 0.63% | 1.39% | 1.09% | 0.84% | 1.04% | 1.57% | -0.23% | |
| GBP | -0.46% | -1.39% | -1.58% | -0.55% | -0.34% | 0.17% | -1.60% | |
| JPY | 0.20% | -1.09% | 1.58% | -0.20% | 1.64% | 1.75% | -0.93% | |
| CAD | 0.43% | -0.84% | 0.55% | 0.20% | 0.56% | 0.73% | -1.32% | |
| AUD | -0.47% | -1.04% | 0.34% | -1.64% | -0.56% | 0.52% | -1.27% | |
| NZD | -0.30% | -1.57% | -0.17% | -1.75% | -0.73% | -0.52% | -1.77% | |
| CHF | 1.47% | 0.23% | 1.60% | 0.93% | 1.32% | 1.27% | 1.77% |
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 USD came under selling pressure on Tuesday, with investors growing increasingly concerned over a deepening trade conflict causing the US economy to tip into a recession.
After US President Donald Trump's additional tariffs on China went into effect, several news outlets reported that senior officials from China’s State Council, several government and regulatory bodies will hold a meeting to discuss how to respond to Trump’s tariffs.
Meanwhile, according to Reuters, citing sources with a direct knowledge of the matter, the European Central Bank (ECB) expects the Eurozone growth to take a bigger hit from Trump tariffs than initially estimated. "All agreed that the 0.5 percentage points estimate is too low now and one of them said the impact could be in excess of 1 percentage points," Reuters wrote.
Following this headline, investors could refrain from betting on a persistent Euro strength in the short term.
Later in the American session, the Federal Reserve (Fed) will publish the minutes of the March policy meeting. Since that meeting took place before the tariff announcements, the publication could be ignored by market participants.
EUR/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds above 50 but moves sideways, suggesting that the bullish bias remains intact but lacks momentum.
Looking north, resistances could be located at 1.1050 (static level), 1.1100 (static level) and 1.1145 (April 3 high). On the downside, 1.1000 (static level, round level) aligns as immediate support before 1.0950 (static level) and 1.0900 (static level, round level).
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.
