EUR/USD Price Forecast: The 200-day SMA looms closer

EUR/USD retreated for the sixth consecutive day on Wednesday, revisiting the 1.0750 zone and opening the door to a potential visit to the critical 200-day SMA in the short-term horizon.

A strengthening US Dollar (USD) saw the US Dollar Index (DXY) advance to three-week highs near 104.60 against the backdrop of rising US yields across the board.

Trade turbulence and dollar direction

Ever since President Trump took office, his unpredictable tariff policies have kept markets on edge. While Canada and Mexico were granted a temporary exemption until April 2, the prospect of a wider trade war remains a significant risk. Tariffs could push inflation higher—forcing the Federal Reserve (Fed) to maintain or tighten its policy stance—but they could also slow economic growth. This push-and-pull dynamic has muddied the greenback’s short-term outlook.

Trump recently hinted at new tariffs on automobiles, aluminium, and pharmaceuticals, aiming to secure adequate domestic supply chains for potential future crises. Yet, he also teased possible tariff exemptions for certain nations on April 2, adding another layer of uncertainty to an already volatile environment.

However, he also announced on Wednesday that a 20% tariffs on imports from the European Union could be announced next week, which prompted the single currency to accelerate its downside.

Euro should find support in peace developments

Reports of a truce and ongoing negotiations between Russia and Ukraine offered some respite for the Euro (EUR). President Trump noted that the US and Ukraine are close to finalizing a revenue-sharing deal on Ukrainian critical minerals, which could allow American firms to invest in Ukrainian power infrastructure.

Ukrainian President Volodymyr Zelenskiy announced a ceasefire covering the Black Sea and energy facilities, warning that if Russia violates these terms, he would seek additional US weaponry and sanctions.

The US has separately brokered agreements with both Kyiv and Moscow to ensure safe maritime routes and protect energy sites. These developments have slightly tempered geopolitical tensions, providing a modest tailwind for the Euro.

Fed stays on hold, teases future cuts

Last Wednesday, the Fed left interest rates unchanged but hinted at a possible 50-basis-point rate cut before year-end. Policymakers cited slowing growth and softening inflation, even as they raised their 2025 inflation forecast to 2.7% (up from 2.5%). Chair Jerome Powell emphasized patience, acknowledging that tariffs are adding upward pressure on prices but underscoring the Fed’s willingness to wait for clearer economic signals before making further moves.

The European Central Bank (ECB) followed suit by trimming its benchmark rates by 25 basis points and suggesting more cuts could be on the table if uncertainty lingers. Officials reduced Eurozone growth projections while lifting near-term inflation estimates—though they still see price pressures easing by 2026. Some analysts believe the ECB might pause its easing cycle earlier than anticipated, which could lend additional support to the Euro.

ECB President Christine Lagarde warned that a US-EU tariff spat could trim as much as 0.5% off Eurozone growth if both sides escalate. At the same time, she applauded Germany’s increased fiscal stimulus—despite its implications for bond yields.

Positioning: Euro bulls step forward

Speculative net longs in the Euro rose for a second week in a row, inching closer to 60K contracts—levels last seen in late September 2024. Hedge funds (commercial players) stayed net short for the fourth consecutive week but expanded their total contracts to around 92.4K, a multi-month high, according to the CFTC Positioning Report for the week ending March 18.

EUR/USD technical picture

- Upside Barriers: Immediate resistance aligns at 1.0954 (March 18 YTD high), with a secondary hurdle at 1.0969 (23.6% Fibonacci retracement). The psychologically important 1.1000 level could prove the next major challenge.

- Downside Supports: The 200-day SMA near 1.0729 offers initial support. Below that lie the provisional 55-day SMA at 1.0531, the 100-day SMA at 1.0519, and the February 28 low of 1.0359. Deeper floors rest at 1.0282 (February 10 low), 1.0209 (February 3 low), and 1.0176 (2025 bottom from January 13).

- Momentum Signals: With the Relative Strength Index (RSI) dropping to around 53 and the Average Directional Index (ADX) easing to nearly 38, the technical backdrop suggests a probable pick up in the downtrend, even as short-term momentum shows a more cautious tilt.

EUR/USD daily chart

Looking ahead

EUR/USD remains highly reactive to trade headlines, central bank signals, and key economic data—particularly as Germany ramps up fiscal spending. Developments in the Russia-Ukraine peace process could quickly sway market sentiment.