EUR/USD Price Forecast: Weakens to near 1.1500 as 100-day SMA caps upside
- EUR/USD weakens to near 1.1500 in Friday’s early European session.
- The pair keeps a bearish vibe in the near term under the 100-day SMA.
- The first upside barrier emerges at 1.1510; the initial support level is seen at 1.1425.
The EUR/USD pair trades in negative territory around 1.1500 during the early European trading hours on Friday. The Euro (EUR) softens against the US Dollar (USD) as escalating tensions in the Middle East weigh on riskier assets.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf said on Thursday that the United States (US) will pay the price for killing Iranian civilians, per the Guardian. The Islamic Revolutionary Guard Corps (IRGC) said on Thursday that it targeted US bases in Kuwait, Jordan and Bahrain after US forces bombed a building on Iran’s Qeshm Island. The Iranian military added that the Strait of Hormuz would remain closed and that the “aggressor will be punished.”
Stronger-than-expected Gross Domestic Product (GDP) data from the Eurozone and Germany have reinforced expectations that the European Central Bank (ECB) could deliver a second interest rate hike this year, potentially as soon as September. This, in turn, might help limit the shared currency’s losses in the near term.
Eurozone recovery underpins expectations for September ECB hike
Brown Brothers Harriman’s Elias Haddad underscores that the recent improvement in Eurozone data is strengthening the policy case for further tightening. He notes that “the recovery in Eurozone economic activity and above target inflation reinforces the case for the ECB to resume raising rates in September,” suggesting that the combination of firmer growth and persistent price pressures keeps the central bank on track for another move after its current pause.
Technical Analysis: EUR/USD maintains negative outlook under 100-day SMA
In the daily chart, EUR/USD remains capped in the near term, as spot holds below the 100-day simple moving average (SMA) and presses against the upper Bollinger Band, suggesting upside attempts are meeting supply. The Bollinger midline underpins the structure, while the Relative Strength Index (RSI) at about 59 hints at improving but not yet overbought momentum within an overall constrained backdrop.
On the topside, immediate resistance is aligned at the upper Bollinger Band around 1.1510, with the 100-day SMA at 1.1570 acting as the next significant barrier that bulls would need to reclaim to ease the broader bearish cap.
On the downside, initial support is seen at the daily mid-Bollinger band near 1.1425, ahead of the lower Bollinger Band around 1.1340, where a break would likely reinforce downside pressure and reopen the path toward lower lows.
(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.
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