EUR/USD Price Forecast: Traders above mid-1.1500s as bulls await move beyond 61.8% Fibo.
- EUR/USD struggles to capitalize on modest Asian session move up to a one-week high.
- Inflation fears keep Fed rate hike bets in play, supporting the USD and capping the pair.
- The mixed technical setup also warrants caution before positioning for additional gains.
The EUR/USD pair touches a one-week top on Wednesday, though it lacks follow-through buying and remains below the 1.1600 mark through the Asian session. Moreover, the mixed fundamental backdrop warrants some caution before positioning for any further appreciating move.
Despite the optimism over hopes for an early US exit from the Iran war, reports that the UAE is pushing for military action to reopen the Strait of Hormuz keep geopolitical risks in play. This continues to fuel inflationary concerns and hawkish US Federal Reserve (Fed) expectations, which act as a tailwind for the US Dollar (USD) and cap the upside for the EUR/USD pair.
From a technical perspective, the overnight breakout through the 200-hour Exponential Moving Average (EMA) was seen as a key trigger for bullish traders. Moreover, the Moving Average Convergence Divergence (MACD) indicator eases toward the signal line while remaining marginally positive, suggesting fading but still positive momentum after the advance.
Meanwhile, the Relative Strength Index (RSI) near 66 retreats from overbought readings above 70, indicating cooling upside pressure rather than a clear reversal at this stage. Hence, it will be prudent to wait for a move beyond the 61.8% Fibonacci retracement level of the recent fall witnessed over the past week or so before placing fresh bullish bets around the EUR/USD pair.
A sustained break higher would open the way toward the 1.1599 barrier and then the recent swing high around 1.1641. On the downside, immediate support emerges at the 38.2% Fibo. at 1.1520, reinforced by the nearby 200-hour EMA to form a key demand zone. A deeper setback would expose the 23.6% Fibo. level at 1.1492, where buyers would be expected to defend the broader upswing.
(The technical analysis of this story was written with the help of an AI tool.)
EUR/USD 1-hour chart
Euro FAQs
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%).
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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