EUR/USD Price Forecast: 20-day EMA remains key barrier as Iran uncertainty persists
- EUR/USD ticks higher to near 1.1640 despite the US-Iran deal uncertainty persists.
- Iran condemned defensive attacks by the US Central Command in southern Iran.
- Investors await the US-German inflation data.
The EUR/USD pair trades marginally higher to near 1.1640 during the European trading session on Wednesday. The major currency pair edges up as the Euro (EUR) trades broadly firm, even as uncertainty regarding the United States (US)-Iran deal continues to persist.
The US-Iran deal concerns have escalated as Tehran condemns so-called “defensive strikes” from the US Central Command. On Monday, the US Central Command launched strikes on Iran, which were described as "self-defense" and aimed at “protecting our troops from threats posed by Iranian forces".
Meanwhile, the US Dollar (USD) trades marginally lower during the European trade, with the US Dollar Index (DXY) trading 0.1% lower at around 99.05.
Going forward, investors will focus on the US-German inflation data, which will be released on Thursday and Friday, respectively.
The US core PCE inflation – which is the Federal Reserve’s (Fed) preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.
In Germany, preliminary Harmonized Index of Consumer Prices (HICP) data for May is expected to remain steady at 2.9% Year-on-Year (YoY).
EUR/USD technical analysis
EUR/USD trades higher at around 1.1645 as of writing. However, the near-term trend of the pair remains bearish as it remains capped by the 20-day Exponential Moving Average (EMA) at 1.1664.
The Relative Strength Index (RSI) at 46.7 sits below the 50 line, hinting at waning bullish momentum rather than outright oversold conditions.
On the downside, initial support is seen near the former upward support trend line region around 1.1602, where a break lower would likely expose deeper losses in the sessions ahead toward 1.1500. On the topside, a daily close above the 20-period EMA at 1.1664 is needed to ease immediate downside pressure and open the door to a more sustained recovery towards 1.1700.
(The technical analysis of this story was written with the help of an AI tool.)
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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