EUR/USD Price Forecast: Edges higher but faces resistance at 100-day EMA

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The EUR/USD pair edges higher to near 1.1655 during the early European session on Monday. The US Dollar (USD) softens against the Euro (EUR) amid renewed concerns over US Federal Reserve (Fed) independence. Traders await the US Consumer Price Index (CPI) inflation report on Tuesday.

EUR/USD drifts higher to around 1.1655 in Monday’s early European session.
The major pair remains capped below the 100-day EMA, with a bearish RSI indicator.
The first upside barrier to watch is 1.1665; the initial support level emerges at 1.1640.

Fed Chair Jerome Powell said in a statement that the US Justice Department has threatened criminal charges against him in connection with his Senate testimony last June, during which he discussed the estimated $2.5 billion renovation. Powell described the move as unprecedented and a direct challenge to the central bank’s independence. This, in turn, weigh on the Greenback and create a tailwind for th major pair in the near term.

On the other hand, heightened geopolitical tensions after reports of hundreds of deaths during protests in Iran could boost safe-haven currency such as the Greenback. US President Donald Trump threatened repercussions if Iranian authorities target civilians, while Tehran warned the US and Israel against any intervention.

Technical Analysis:

In the daily chart, the 100-day EMA edges higher at 1.1665, underscoring a gently improving medium-term bias. Price holds just below this gauge, with the average capping attempts to extend higher. Price hovers near the lower Bollinger Band at 1.1650, flagging downside stretch as volatility shows a modest expansion. That band acts as initial support, while a daily close back above the average would stabilize the tone.

RSI has firmed to 41, recovering from recent lows yet still below the 50 midline, keeping momentum subdued. On strength, resistance aligns at the Bollinger middle band at 1.1728, with the upper band at 1.1817 set to cap any extended recovery. A sustained move above these thresholds could shift the bias back toward a broader upside phase.

(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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