EUR/USD Forecast: Euro weakens as risk mood sours

Euro Price This week

The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the weakest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.29%	0.48%	0.12%	0.28%	0.10%	-0.06%	0.17%
EUR	-0.29%		0.19%	-0.16%	-0.01%	-0.21%	-0.35%	-0.12%
GBP	-0.48%	-0.19%		-0.60%	-0.20%	-0.40%	-0.54%	-0.30%
JPY	-0.12%	0.16%	0.60%		0.16%	-0.01%	-0.19%	0.10%
CAD	-0.28%	0.01%	0.20%	-0.16%		-0.23%	-0.34%	-0.11%
AUD	-0.10%	0.21%	0.40%	0.01%	0.23%		-0.15%	0.09%
NZD	0.06%	0.35%	0.54%	0.19%	0.34%	0.15%		0.24%
CHF	-0.17%	0.12%	0.30%	-0.10%	0.11%	-0.09%	-0.24%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Although financial markets in the US were closed in obervance of the Presidents' Day holiday on Monday, the US Dollar (USD) managed to hold its ground and caused EUR/USD to edge lower. Early Tuesday, US stock index futures lose between 0.2% and 0.5% on the day. In case Wall Street's main indexes open in negative territory and remain under bearish pressure, the USD could continue to gather strength as a safe-haven and force the pair to stretch lower in the second half of the day.

Later in the session, ZEW Survey - Economic Sentiment for Germany and the Eurozone will be watched closely by investors. A noticeable decline in these data could weigh on the Euro, while a positive surprise could help the currency find support with the immediate reaction. Nevertheless, the market reaction is likely to remain short-lived.

The Federal Reserve Bank of New York will publish the Empire State Manufacturing Survey for February on Tuesday. On Wednesday, December Burdable Goods Order and November Housing Starts will be featured in the US economic calendar. More importantly, the Federal Reserve will publish the minuntes of the January policy meeting.

EUR/USD Technical Analysis:

In the 4-hour chart, EUR/USD trades at 1.1835. The Relative Strength Index (14) slips to 37, underscoring bearish momentum; a rebound in momentum would emerge with a move back toward the 50 line.

Measured from the 1.1590 low to the 1.2025 high, the 38.2% retracement at 1.1859 now caps rebounds, and the 20-period SMA at 1.1863 reinforces that resistance area ahead of 1.1900 (static level, round level). On the other hand, the 50% retracement at 1.1808 offers nearby support. A sustained break below 1.1808 could expose the 200-period SMA at 1.1775.

(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.

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