EUR/USD Price Forecast: Needs to break above 20-day for sustained recovery
- EUR/USD drops to near 1.1567 as the US Dollar strives for a recovery.
- US President Trump scrapped planned strikes toward Iran and signaled that they are close to reaching a deal.
- The ECB hikes its Deposit Facility rate by 25 bps to 2.25%.
The EUR/USD pair trades marginally lower at around 1.1567 during the European trading session on Friday. The major currency pair edges down as the US Dollar (USD) rebounds slightly after Thursday’s decline.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.13% higher to near 99.80.
The US Dollar fell sharply on Thursday after United States (US) President Donald Trump announced that he has canceled already-ordered military strikes on Iran, signaling that the deal is close to be finalized. The statement from US President Trump, through a post on Truth Social, diminished the appeal of safe-haven assets.
On the Eurozone front, the European Central Bank (ECB) has hiked its key interest rates by 25 basis points (bps), pushing the Deposit Facility rate higher to 2.25%. The ECB was expected to tighten monetary conditions in response to higher inflation driven by the energy crisis due to Middle East conflicts.
Analysts at Deutsche Bank expect the ECB to deliver one more interest rate hike in September.
EUR/USD technical analysis
EUR/USD trades slightly lower at around 1.1567 with a bearish near-term bias, holding below the 20-period exponential moving average (EMA) at 1.1603 while remaining capped by the broader descending trend structure. The pair is sliding within the range defined by the reclaimed resistance trend line, and the Relative Strength Index (RSI) at 42 leans lower but stays above oversold territory, which suggests persistent downside pressure rather than a capitulation sell-off.
On the topside, initial resistance is located at the 20-day EMA around 1.1603, with a stronger barrier at the downward resistance trend-line break zone near 1.1687. On the downside, the key level to watch is the upward support trend-line break area around 1.1503, where a decisive daily close below would likely open the door to a deeper bearish extension towards the March 30 low at 1.1443.
(The technical analysis of this story was written with the help of an AI tool.)
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.
