EUR/USD Forecast

The EUR/USD currency pair continues to capture the attention of traders worldwide. Recent market dynamics have introduced both opportunities and risks with central banks adjusting their policies and geopolitical tensions influencing global markets. The pair's movements have been anything but predictable.

Understanding these dynamics can help you operate more successfully in the forex market to capitalize on future EUR/USD exchange rate movements, whether you're a seasoned trader or new to forex. In this analysis, Benzinga explores the technical and fundamental factors influencing the EUR/USD pair and offers valuable insights to help traders stay ahead in the ever-changing forex market.

Current Market Analysis

Since early March, EUR/USD has remained range-bound around 1.0840, influenced by mixed economic data, central bank decisions and geopolitical factors. The Federal Reserve’s dovish stance has softened the dollar, while concerns about stagflation and GDP revisions add uncertainty. Meanwhile, the European Central Bank’s cautious policy approach, inflation trends and German fiscal policies have impacted the euro. Trade tensions and the Russia-Ukraine conflict further complicate the EUR/USD outlook.

Recent data releases include the U.S. ISM Services PMI falling to 51.4 in March from 52.6, signaling slower expansion. Eurozone inflation eased to 2.4% in March from 2.6%, fueling speculation about future ECB rate cuts. Key upcoming economic data releases include: 

• U.S. Non-Farm Payrolls (NFP): Indicates labor market strength, often influencing Fed rate decisions.
• Eurozone Services PMI: Final March readings will provide insights into business activity.
• U.S. PCE Price Index: The Fed’s preferred inflation measure, which could shift rate expectations.

Based on our forex market analysis detailed below, these data points will likely drive short-term volatility in the EUR/USD market.

Technical Analysis

From a technical analysis perspective, EUR/USD faces key support at 1.0815 and resistance at 1.0955. A breakout above 1.0955 could lead to a test of 1.1000 and potentially 1.1542. Conversely, a sustained drop below 1.0815 might signal a bearish reversal toward 1.0630 or 1.0533. A daily chart for the EUR/USD pair’s exchange rate appears below. 

Daily exchange rate candlestick chart of the EUR/USD currency pair showing the 50 and 100 period moving averages in blue and orange respectively, and the 14 period RSI in the indicator box below the chart. Source: Metatrader5.

Flag Pattern Overview:

• Flagpole: A sharp rally from 1.0360 to 1.0947 indicates strong bullish momentum.
• Consolidation Phase: The pair has formed a downward-sloping flag with support at 1.0815 and resistance at 1.0955.
• Breakout Levels: A move above 1.0955 would confirm a bullish continuation, while a sustained drop below 1.0815 could invalidate the pattern.

Technical Indicators:

• Moving Averages: The 50-day SMA is rising, indicating a bullish outlook. It is also close to crossing the 100-day SMA, which would help confirm an uptrend.
• Relative Strength Index (RSI): The 14-day RSI is currently at 62, showing neutral momentum with room for an upside breakout, although a recent bearish divergence in overbought territory prompted a declining consolidation phase.
• Volume: A breakout above 1.0955 should be accompanied by increased trading volume to confirm the bullish flag breakout.

Potential Scenarios:

1.        Bullish Breakout: A move above 1.0955 could target 1.1002 and 1.1201, with a long-term measured move projection of the bullish flag pattern near 1.1542.

2.        Bearish Breakdown: A sustained break below 1.0815 could trigger declines toward 1.0630 or 1.0533.

Traders should monitor the aforementioned breakout levels and use stop-loss orders wisely. A confirmed breakout above 1.0955 offers a buying opportunity to benefit from the bullish flag pattern’s estimated 1.1542 target, while a prolonged breakdown below support at 1.0815 could negate the bullish outlook.

Fundamental Analysis

Economic indicators are key in shaping the EUR/USD currency pair's movements in the forex market. In the U.S., slower GDP growth and inflation concerns have influenced the Federal Reserve's recent policy decisions. Conversely, the euro has been buoyed by upgraded inflation forecasts and Germany's fiscal initiatives. Political events, such as trade wars and peace negotiations in the Ukraine-Russia conflict, add another layer of uncertainty to the dynamics of the EUR/USD pair's exchange rate. Understanding these factors is essential for making an accurate EUR/USD forecast of the pair’s future direction. Relevant recent fundamental details for EUR/USD include:

Eurozone Fundamental Economic Outlook:

• HICP Inflation: March 2025 headline inflation at 2.3%, with core inflation at 2.2%.
• GDP Growth: Flat at 0.0% in Q4 2024, raising concerns about economic recovery.
• ECB Rate Decision: The ECB cut its deposit rate by 25 bps to 2.5% in March 2025.
• PMI Data: Eurozone Composite PMI came out at 49.8 For February 2025, indicating contraction.

U.S. Fundamental Economic Outlook:

• NFP Data: February 2025 job growth was 190,000, slightly above expectations.
• CPI Inflation: February 2025 inflation at 2.8%, down from 3.0% in January.
• PCE Price Index: Core PCE inflation for February 2025 was 2.8%, reflecting a gradual decline.
• Federal Reserve Policy: Maintained target range at 4.25%-4.50% in March 2025, emphasizing a cautious approach amid mixed economic signals.
• ISM PMI Data: The February 2025 manufacturing PMI was 48.5, indicating contraction, with the Services PMI at 51.4, signaling slower expansion.
• GDP Growth: Q4 2024 at 2.3% year-over-year, below the 2.6% market consensus.

Forex Market Implications:

• U.S. Economy: Slower GDP growth and weaker ISM Services PMI data have softened the dollar, while the labor market remains a key focus.
• Eurozone Economy: Declining inflation and mixed PMI data raise questions about the ECB’s next policy moves. Speculation about rate cuts in June could weigh on the euro.
• Diverging Central Bank Policies: A hawkish ECB and dovish Fed could push EUR/USD higher, while the opposite scenario would favor dollar strength.
• Economic Surprises: Unexpectedly strong or weak data can cause sharp movements in EUR/USD.
• Geopolitical Risks: Trade tensions and the Russia-Ukraine conflict add uncertainty, influencing risk sentiment and market direction.

Forecast for the EUR/USD Pair

Benzinga’s EUR/USD forecast includes both near- and longer-term outlooks as follows:

Near-Term Outlook:

In the short term, EUR/USD will likely remain range-bound between 1.0800 and 1.0955. Key drivers include:

• Eurozone Weakness: The ECB’s recent rate cut and declining inflation suggest a dovish stance, potentially weighing on the euro.
• U.S. Labor Market Data: The upcoming NFP report will be critical. A weaker-than-expected result could pressure the dollar, allowing the euro to gain ground.
• Geopolitical Risks: Ongoing tensions in Eastern Europe and global trade uncertainties may lead to risk aversion, benefiting the dollar as a safe-haven currency.

If U.S. data outperforms expectations, the pair may test support at 1.0815, but a break above 1.0955 on weak U.S. economic results could trigger a bullish move toward 1.1000 and the 1.1201/14 region, with a long-term target set near 1.1542.

Longer-Term Outlook:

The EUR/USD pair’s direction will depend on economic fundamentals, central bank policies and technical factors as follows:

1.        Bullish Scenario:

• Stronger Eurozone GDP growth and improved sentiment.
• Resolution of the bullish flag pattern to the upside. 
• A dovish Fed leading to dollar weakness.
• EUR/USD target levels: 1.1200–1.1500 by late 2025.

2.        Bearish Scenario:

• Eurozone stagnation or political instability.
• Strong U.S. economic performance and a hawkish Fed.
• EUR/USD target levels: 1.0300–1.0500.

3.        Geopolitical and Structural Factors:

• Structural reforms in the Eurozone could support the euro.
• Increased geopolitical risks may favor the dollar.

Capitalizing on EUR/USD Exchange Rate Movements

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