EUR/USD Price Forecast: Edges higher to near 1.1450 but remains capped below 100-day SMA
- EUR/USD gains traction to near 1.1445 in Monday’s early European session.
- The pair keeps the bearish vibe under the 100-day SMA, with RSI remaining below the midline.
- The first upside barrier emerges at 1.1470; the initial support level to watch is 1.1415.
The EUR/USD pair trades in positive territory around 1.1445 during the early European trading hours on Monday, bolstered by a hawkish tone from the European Central Bank (ECB). The ECB is expected to hold interest rates on ThThursday butill hike for the second time this year in September as a renewed energy price surge raises the risk of more intense inflation pressures, according to Reuters.
However, escalating tensions in the Middle East could boost safe-haven flows, supporting the US Dollar (USD) against the Euro (EUR). Bloomberg reported that the US has launched the ninth night of Iran strikes, with Washington saying that airstrikes on Sunday aimed to "punish" Iran over the first US military deaths since renewed hostilities with the Islamic Republic began.
Iran's Islamic Revolutionary Guard Corps (IRGC) said that the Strait of Hormuz will not be safe for petrochemical products or 'single drop of oil and gas' transit as long as US actions in the region continue.
Technical Analysis:
In the daily chart, EUR/USD keeps a bearish near-term tone as it holds beneath the 100-day Simple Moving Average (SMA). Price sits just under the upper Bollinger Band near, hinting that the latest bounce is running into overhead supply, while the middle Bollinger Band offers nearby dynamic support. The Relative Strength Index (14) at roughly 48 remains below the neutral 50 line, suggesting only modest upside momentum and reinforcing the idea of a capped recovery while the pair trades under its longer-term average.
On the topside, immediate resistance is located at the upper Bollinger Band around 1.1470, with a stronger barrier higher up at the 100-day SMA near 1.1585, where selling interest is likely to re-emerge if tested. On the downside, initial support is seen at the middle Bollinger Band around 1.1415, followed by the lower Bollinger Band near 1.1358; a clear break below this lower band would open the door to a continuation of the broader decline.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
What is the Euro?
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%).
What is the ECB and how does it impact the Euro?
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.
How does inflation data impact the value of the Euro?
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.
How does economic data influence the value of the Euro?
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.
How does the Trade Balance impact the Euro?
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.