EUR/USD Price Forecast: Flatlines below 1.1550, while staying bearish under 100-day SMA
- EUR/USD steadies around 1.1520 in Thursday’s early European session.
- The major pair maintains a bearish tone, with the price holding below the 100-day SMA.
- The immediate resistance level is seen at 1.1565; the first downside target to watch is 1.1500.
The EUR/USD pair holds steady near 1.1520 during the early European trading hours on Thursday. US inflation cooled on a year-over-year basis for a second straight month, easing pressure on the US Federal Reserve (Fed) to raise interest rates as soon as next month. The US Producer Price Index (PPI) report for July is due later on Thursday.
Data released by the Bureau of Labor Statistics on Wednesday revealed that the US Consumer Price Index (CPI) rose 3.4% YoY in July, compared to 3.5% in the previous reading. Additionally, the core CPI, excluding food and energy, increased 2.5% YoY in July, versus 2.6% prior. Both readings came in line with expectations.
Traders further cut the chance for a September Fed rate hike, lowering the odds to 40%, according to the CME FedWatch tool. Fed officials will get August CPI and jobs reports before their September meeting.
Nonetheless, escalating geopolitical tensions in the Middle East could boost a safe-haven currency such as the US Dollar (USD) and create a headwind for the major pair. Reuters reported that the US and Iran remain at loggerheads over efforts to agree a permanent end to the war in the Gulf. A senior Iranian official said that there had been no progress in talks to revive the interim deal agreed in June and define a time frame to implement it.
Euro holds steady as post-FOMC consolidation persists
Analysts at Scotiabank observe that the Euro is “entering Wednesday’s NA session flat vs. the USD while showing a mixed performance against the G10 currencies overall.” They note that the single currency “has spent much of August consolidating within a tight, flat range, lacking a catalyst in the period following the FOMC meeting in late July,” underscoring the absence of a clear directional driver in recent trading.
Technical Analysis: EUR/USD keeps a bearish vibe under the 100-day SMA
In the daily chart, EUR/USD holds below the 100-day simple moving average (SMA), keeping the near-term bias bearish despite a modestly constructive tone in momentum, with the Relative Strength Index (14) hovering around 56. Price remains above the 20-day Bollinger middle band SMA, suggesting downside is cushioned for now, while the upper Bollinger band near marks a broader cap on recovery attempts.
On the topside, immediate resistance aligns at the 100-day SMA at 1.1565, ahead of the upper Bollinger band around 1.1612, where selling interest could strengthen if tested. On the downside, initial support is located at the 1.1500 psychological level, followed by the 20-day Bollinger middle band at 1.1475. A deeper bearish extension is likely to target the lower Bollinger band near 1.13375 if the current floor gives way.
(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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