EUR/USD Forecast: Euro retreats below key support level
- EUR/USD declines below 1.0850 after posting losses on Wednesday.
- Technical sellers could remain interested in case the pair flips 1.0850 into resistance.
- The risk-averse market atmosphere could make it difficult for EUR/USD to regain its traction.
EUR/USD struggles to hold its ground and retreats below 1.0850 following Wednesday's bearish action. In case the pair confirms 1.0850 as resistance, technical sellers could take action and open the door for another leg lower.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.51% | 0.23% | -0.04% | 0.16% | 0.73% | 0.69% | 0.17% | |
| EUR | -0.51% | -0.28% | -0.56% | -0.35% | 0.22% | 0.21% | -0.34% | |
| GBP | -0.23% | 0.28% | -0.29% | -0.07% | 0.51% | 0.49% | -0.02% | |
| JPY | 0.04% | 0.56% | 0.29% | 0.18% | 0.78% | 0.74% | 0.25% | |
| CAD | -0.16% | 0.35% | 0.07% | -0.18% | 0.59% | 0.55% | 0.04% | |
| AUD | -0.73% | -0.22% | -0.51% | -0.78% | -0.59% | -0.01% | -0.52% | |
| NZD | -0.69% | -0.21% | -0.49% | -0.74% | -0.55% | 0.01% | -0.48% | |
| CHF | -0.17% | 0.34% | 0.02% | -0.25% | -0.04% | 0.52% | 0.48% |
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 data published by Eurostat showed that Industrial Production expanded by 0.8% on a monthly basis in January. This reading came in better than the market expectation for an increase of 0.6% but failed to help the Euro find demand amid growing concerns over an EU-US trade war.
After the latest US tariffs on steel and aluminum imports went into effect on Wednesday, the European Union (EU) responded by announcing counter-tariffs on 26 billion euros ($28.33 billion) worth of US goods from early April. Commenting on this development late Wednesday, US President Donald Trump said that they could announce additional levies in response to the countermeasures.
In the early American session, the data from the US showed that weekly Initial Jobless Claims declined to 220,000 from 222,000 in the previous week. Additionally, the Producer Price Index rose 3.2% on a yearly basis in February. This reading followed the 3.7% increase recorded in January and came in below the market expectation of 3.3%. The USD showed no immediate reaction to these mixed data releases.
Meanwhile, US stock index futures trade modestly lower on the day heading into Wall Street's opening bell. A bearish action in US stock markets could make it difficult for EUR/USD to stage a rebound.
EUR/USD Technical Analysis
EUR/USD was last seen trading below 1.0850, where the lower limit of the ascending regression channel is located. Additionally, the Relative Strength Index (RSI) indicator on the 4-hour chart declined below 50 and the pair closed the last two 4-hour candles below the 20-period Simple Moving Average (SMA), reflecting a buildup of bearish momentum.
Technical sellers could remain interested while 1.0850 holds as resistance. In this scenario, 1.0800 (static level, round level) could be seen as next support before 1.0730 (200-day SMA). On the upside, 1.0900 (round level, static level) aligns as first resistance ahead of 1.0940 (static level) and 1.1000-1.1010 (static level, round level, mid-point 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.
