EUR/USD Price Forecast: Modest gains hold above 1.1050, but the 100-day SMA keeps a lid on upside

Modest buying lifts EUR/USD towards 1.1060 as Friday’s European session gets under way.
Trading below the 100-day SMA keeps the near-term bias bearish.
Initial resistance stands at 1.1100, while 1.1000 provides the first support.

A mild positive bias keeps EUR/USD near 1.1060 in early European trade on Friday. The European Central Bank’s (ECB) cautious approach, however, could restrict further gains in the major currency pair.

Even as energy prices may be declining, ECB policymaker Philip Lane said the central bank’s interest rate decisions would hinge on the extent to which the recent jump in fuel costs feeds into wages and other prices.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Most economists surveyed by Reuters anticipate that the ECB will make its final deposit rate increase of the current cycle next month. However, with inflation reaching twice the 2% target, more than a third foresee another hike in early 2027.

In the US, persistently high inflation prompted warnings from Federal Reserve (Fed) officials earlier this week. Some indicated that they would be open to a 50-basis-point increase if price pressures do not subside.

The probability of a large increase at the Fed's December policy meeting is now priced at nearly 14.5%, compared with 0% last week, according to the CME FedWatch tool.

Can ECB tightening support the Euro amid uneven Eurozone growth?

Recent data have done little to free the Euro from its constraints, according to analysts at NBC, who say it “remains caught between elevated inflation and an uneven growth outlook,”. Their warning that “further rate increases could therefore offer only limited currency support if accompanied by weaker growth expectations,” points to the possibility that further ECB tightening may fail to deliver a meaningful strengthening of the Euro. Citing “U.S. monetary policy continuing to favour the Dollar,” NBC maintains its “EUR/USD forecast of 0.65 at year-end, followed by a gradual recovery above 0.70 in 2025,”. The forecast reflects expectations of continued near-term Dollar support before a modest Euro recovery.

Will Williams’ resilient economy and inflation warning sustain Dollar support?

Support for the Dollar remains consistent with the moderately hawkish tone of Fed’s Williams, whose FXS Speechtracker score of 7/10 exceeded the historical average of 6.1/10. That reading indicates a firmer policy stance than the established baseline. Descriptions of the US economy as “resilient” and “robust”, together with inflation that is “stubbornly persistent” and “too elevated”, strengthen the case for additional tightening over time to bring inflation back to 2%. Williams also made clear that monetary policy seeks to lower the inflation rate, rather than reverse the overall rise in prices. His warning that outright reductions in price levels could lead to poor economic conditions suggests a readiness to maintain restrictive policy without pursuing aggressive deflation, a setting that generally supports the Dollar.

A decline of 0.08 points took the FXS Fed Sentiment Index to 147.47, though the small retreat left it firmly in hawkish territory. With the reading still well above 100, Fed communications collectively retain a strongly hawkish bias, in line with the firmer-than-baseline message recorded by the FXS Speechtracker.

Technical Outlook: Can EUR/USD shake off its bearish bias below the 100-day SMA?

Downside pressure remains evident on the EUR/USD daily chart, where spot trades beneath both the 100-day simple moving average (SMA) and the middle Bollinger band, preserving a bearish near-term outlook. The price is testing the lower Bollinger band, signalling continued selling pressure. Meanwhile, a Relative Strength Index (RSI) reading of 35.19 sits just above oversold territory, suggesting that bearish momentum persists without being extreme.

Any recovery first faces resistance at the psychological 1.1100 mark. Beyond that, the middle Bollinger band near 1.1175 and the upper band at 1.1280 are the next obstacles, followed by the more significant 100-day SMA at 1.1400.

For EUR/USD, the round-number 1.1000 mark provides key downside support. If that level gives way, the pair could slide towards the 12 May 2025 low of 1.0951 and then the 27 May 2025 low of 1.0733.

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

Euro: Key Questions Answered

Which countries use the Euro, and how widely is it traded?

Used by the 20 European Union countries that make up the Eurozone, the Euro ranks second only to the US Dollar among the world’s most actively traded currencies. Its share of all foreign exchange transactions stood at 31% in 2022, with average daily turnover exceeding $2.2 trillion. The world’s most actively traded currency pair, EUR/USD, represents an estimated 30% of all transactions. Next come EUR/JPY at 4%, EUR/GBP at 3% and EUR/AUD at 2%.

How does the ECB’s role influence the Euro?

Based in Frankfurt, Germany, the European Central Bank (ECB) serves as the Eurozone’s reserve bank, determining interest rates and conducting monetary policy. Maintaining stable prices is the ECB’s main mandate, whether that requires curbing inflation or encouraging growth. Interest rate increases and cuts are its principal policy instruments. Higher rates, or expectations that rates will rise, generally support the Euro; lower rates tend to have the opposite effect. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation figures matter for the Euro?

An important economic measure for the Euro is Eurozone inflation, tracked through the Harmonised Index of Consumer Prices (HICP). Inflation that exceeds expectations, particularly when it is above the ECB’s 2% target, requires the central bank to increase interest rates to bring price pressures under control. When regional interest rates are relatively higher than those elsewhere, the Euro usually benefits, as global investors find the region a more attractive destination for their funds.

Which economic releases can move the Euro?

By revealing the state of the economy, data releases can move the Euro. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can shape the single currency’s direction. Economic strength generally supports the Euro by drawing in foreign investment and potentially prompting the ECB to raise interest rates, which would directly strengthen the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Particular attention is paid to releases from Germany, France, Italy and Spain, the euro area’s four largest economies, which together represent 75% of the Eurozone economy.

Why does the Trade Balance matter for the Euro?

The Trade Balance is another release with significant implications for the Euro. Over a specified period, it captures the difference between a country’s export earnings and its spending on imports. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, lifting the currency’s value. A positive net Trade Balance therefore supports a currency, while a negative balance has the reverse effect.