EUR/USD Price Forecast: Stays pressured below mid-1.1400s after failing near 200-SMA on H4
- EUR/USD remains on the defensive for the second straight day amid a modest USD uptick.
- Escalating US-Iran tensions fuel inflation fears and lift Fed hike bets, supporting the USD.
- The mixed technical setup warrants some caution before positioning for a firm direction.
The EUR/USD pair ticks lower for the second straight day on Friday as energy-driven inflation fears revive US Federal Reserve (Fed) rate hike bets and support the US Dollar (USD) amid escalating US-Iran tensions.
Spot prices currently trade around the 1.1435 region, though the lack of follow-through selling warrants caution before positioning for an extension of the pullback from a nearly four-week high, touched on Wednesday.
From a technical perspective, this week's breakout momentum above the 23.6% Fibonacci retracement level of the April-June downfall faltered near the 200-period Simple Moving Average (SMA) on the 4-hour chart.
The Relative Strength Index (RSI) is hovering near a neutral 50, and the Moving Average Convergence Divergence (MACD) is drifting marginally negative. Momentum indicators hint that bullish attempts may remain constrained.
On the downside, the main structural support is located at the Fibonacci anchor near 1.1330, which aligns with the latest swing low and could attract buyers on a deeper pullback.
On the topside, immediate resistance is defined by the 200-period SMA at 1.1477 ahead of the 38.2% retracement at 1.1508. A sustained break above these would open the door toward higher Fibonacci hurdles at 1.1563 and 1.1618, if bullish pressure extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
EUR/USD 4-hour chart
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.