EUR/USD Price Forecast: 200-day SMA caps Euro as Dollar firms

The EUR/USD currency pair is experiencing a decline, hindered by the 200-day Simple Moving Average (SMA) level of 1.1633. This drop is attributed to increasing geopolitical tensions, particularly the escalating conflict between the US and Iran, which has led to a shift in investor preferences towards the US Dollar. As of the latest update, EUR/USD is trading at 1.1590, marking a decline of 0.25%.

The pair has fallen below the 200-day SMA, falling to the 100-day SMA at 1.1569, representing the first support level. The Relative Strength Index (RSI) stands above 50, indicating a bullish trend, yet the selling pressure is intensifying. For the currency to continue its bearish trend, it must surpass the 100-day SMA. This would expose the August 13 low of 1.1511, followed by the 50-day SMA at 1.1494.

Further support is expected at the psychological level of 1.1400, before the trend continues with lower highs and lower lows. For the pair to rise, buyers must push EUR/USD above the 200-day SMA and surpass the 1.1700 psychological barrier. A clear breakout would expose the May 6 high at 1.1796. The Euro serves as the official currency for the 20 European Union countries that comprise the Eurozone, being the second most traded currency globally, after the US Dollar.

In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover exceeding $2.2 trillion. The Euro is the currency of the European Central Bank (ECB) in Frankfurt, Germany, which is responsible for setting interest rates and implementing monetary policy. The ECB's main goal is to maintain price stability, either by controlling inflation or stimulating growth.

The ECB achieves this primarily through adjusting interest rates. Higher interest rates or expectations of higher rates tend to benefit the Euro, while the opposite holds true. The ECB's Governing Council meets eight times a year to make monetary policy decisions, which are determined by the heads of national banks from Eurozone countries and six permanent members, including ECB President Christine Lagarde.

Eurozone inflation, measured by the Harmonized Index of Consumer Prices (HICP), is a crucial economic indicator for the Euro. If inflation exceeds expectations, particularly surpassing the ECB's 2% target, the ECB may raise interest rates to restore control. Rising interest rates compared to other regions can positively impact the Euro, as it makes the region more attractive for global investors.

Economic data, such as GDP, PMIs, employment, and consumer sentiment surveys from the four largest Eurozone economies (Germany, France, Italy, and Spain) are particularly significant, as they represent 75% of the Eurozone's economy. The trade balance, measuring the difference between exports and imports, is another vital indicator for the Euro.

A positive trade balance strengthens a currency, while a negative balance weakens it. Markets analyst, news editor, and trading instructor with over 14 years of experience across various financial markets. GBP/USD is currently struggling, returning to the low 1.3500 range, or two-week troughs, on Tuesday. This bearish movement follows gains in the US Dollar as investors assess the latest US data releases and the ongoing uncertainty surrounding the US-Iran crisis.

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