EUR/USD Price Forecast: The bearish outlook remains in play below 1.0500

• EUR/USD recovers some lost ground to around 1.0475 in Monday’s early European session. 
• The negative outlook of the pair remains intact below the key 100-period EMA with a bearish RSI indicator. 
• The initial support level is located at the 1.0400-1.0390 region; the first resistance level is seen at 1.0545. 

The EUR/USD pair trades in positive territory near 1.0475 during the early European session on Monday. The uptick of the major pair is supported by the decline in the US Dollar (USD) as Donald Trump announced that he will nominate Scott Bessent to be the secretary of the US Department of the Treasury.

However, EUR/USD keeps the bearish vibe on the 4-hour chart as the price remains capped under the key 100-period Exponential Moving Averages (EMA). The downward momentum is reinforced by the Relative Strength Index (RSI), which stands below the midline near 44.25, supporting the sellers in the near term. 

The initial support level for the major pair emerges in the 1.0400-1.0390 zone, representing the psychological level and the lower limit of the Bollinger Band. A breach of this level could pave the way to 1.0331, the low of November 22. The next downside target to watch is 1.0290, the low of November 30, 2022. 

On the bright side, the first upside barrier is seen at 1.0545, the high of November 21. The next hurdle is located near the upper boundary of the Bollinger Band at 1.0591. The crucial resistance level emerges at 1.0621, the 100-period EMA. 

EUR/USD 4-hour chart

Euro FAQs

What is the Euro?

The Euro is the currency for the 19 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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