EUR/USD Price Forecast: Posts mild gains above 1.1050, while staying capped below 100-day SMA
- EUR/USD posts modest gains around 1.1060 in Friday’s early European session.
- A bearish near-term outlook remains intact, with the price holding below the 100-day SMA.
- The first upside barrier emerges at 1.1100; the initial support level is seen at 1.1000.
The EUR/USD pair trades with mild gains near 1.1060 during the early European trading hours on Friday. Nonetheless, the potential upside for the major pair might be limited amid a cautious stance from the European Central Bank (ECB).
ECB policymaker Philip Lane said that energy prices may be falling, but the central bank’s interest rate decisions will depend on how strongly the recent surge in fuel costs spreads to wages and other prices.
According to most economists polled by Reuters, the ECB is set to deliver a final deposit rate hike in this cycle next month, although more than a third expect an additional increase in early 2027 as inflation hits double the 2% target.
Across the pond, Federal Reserve (Fed) officials earlier this week warned that US inflation remains stubbornly elevated, with some signalling openness to a 50-basis-point rate hike if price pressures fail to ease.
Traders are now pricing in nearly a 14.5% probability of a large hike at the Fed's December policy meeting, up from 0% last week, the CME FedWatch tool showed.
Euro stays pressured as uneven Eurozone growth limits ECB support
Analysts at NBC highlight that the Euro “remains caught between elevated inflation and an uneven growth outlook,” leaving the currency constrained despite recent data. They caution that “further rate increases could therefore offer only limited currency support if accompanied by weaker growth expectations,” suggesting that additional ECB tightening may not translate into meaningful Euro strength. With “U.S. monetary policy continuing to favour the Dollar,” NBC says it retains its “EUR/USD forecast of 0.65 at year-end, followed by a gradual recovery above 0.70 in 2025,” reflecting a view that Dollar support persists near term before the Euro stages a modest rebound.
Williams flags resilient US economy and persistent inflation, keeping Dollar supported
Fed’s Williams delivered a moderately hawkish message, with a 7/10 FXS Speechtracker score standing above the 6.1/10 historical average and underscoring a firmer policy tone relative to the established baseline. Emphasis on a “resilient” and “robust” US economy, alongside “stubbornly persistent” and “too elevated” inflation, reinforces the need for further tightening over time to restore inflation to 2%, while clarifying that monetary policy targets inflation rates rather than rolling back overall price levels. The warning that attempts to reduce price levels outright could trigger poor economic conditions signals a willingness to keep policy restrictive but not aggressively deflationary, a backdrop that tends to underpin the Dollar.
The FXS Fed Sentiment Index slipped by 0.08 points to 147.47, a marginal pullback that still leaves the gauge deep in hawkish territory. Despite the slight decline, the level well above 100 confirms that, in aggregate, Fed communication remains firmly hawkish, consistent with the stronger-than-baseline tone captured by the FXS Speechtracker.
Technical Analysis: EUR/USD maintains a nagetive tone under the 100-day SMA
In the daily chart, EUR/USD retains a bearish near-term bias as spot holds below the 100-day simple moving average (SMA) and remains confined under the Bollinger bands’ middle line. Price is now pressing the lower Bollinger band, indicating persistent downside pressure, while the Relative Strength Index (RSI) at 35.19 stays just above oversold territory, hinting that bearish momentum is still present but not extreme.
On the topside, immediate resistance level emerges at the 1.1100 psychological level, en route to the Bollinger mid-line near 1.1175 and the upper boundary of Bollinger band at 1.1280. Further north, the next hurdle to watch is the more significant 100-day SMA at 1.1400.
On the downside, the 1.1000 round figure act as a key support level for the major pair. A breach of this level could see a drop to the May 12, 2025 low of 1.0951, followed by the May 27, 2025 low of 1.0733.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Recommended Articles
