EUR/USD Price Forecast: Trades above mid-1.1700s; bearish bias persists below 100-hour SMA

• EUR/USD recovers slightly from the Asian session low amid a modest USD pullback.
• Fading Fed rate hike bets counter renewed US-Iran tensions and weigh on the buck.
• The broader setup warrants some caution before placing bullish bets around the pair.

The EUR/USD pair attracts fresh buyers near the 1.1730-1.1725 region, or a one-week-old touched during the Asian session, and fills a major part of its bearish gap on Monday. Spot prices currently trade just above mid-1.1700s and, for now, seem to have stalled Friday's retracement slide from the 1.1850 zone, or a two-month peak.

The US Dollar (USD) struggles to capitalize on its modest intraday gains to a one-week high amid diminishing odds for a rate hike by the US Federal Reserve (Fed) and turns out to be a key factor offering support to the EUR/USD pair. However, the US-Iran standoff over the Strait of Hormuz keeps geopolitical risks in play, which could act as a tailwind for the safe-haven buck and cap gains for the currency pair.

From a technical perspective, the EUR/USD pair is hovering just above the 23.6% Fibonacci retracement of the recent upswing from the late March low, while remaining capped by the 100-hour Exponential Moving Average (EMA). This configuration, together with a mildly bearish Relative Strength Index (RSI) around 43 and a slightly negative Moving Average Convergence Divergence (MACD), suggests a consolidative bias with a modest downside tilt.

Meanwhile, initial support is aligned at the 23.6% Fibo. retracement at 1.1754, with further cushions at the 38.2% level near 1.1695 and the 50% retracement around 1.1648 if selling pressure extends. On the topside, immediate resistance sits at the 100-hour EMA at 1.1770. A clear break above this hurdle would open the way toward the cycle high at 1.1849.

(The technical analysis of this story was written with the help of an AI tool.)

EUR/USD 1-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.