The rise in the EUR/USD currency pair last week was expected, as mentioned in the forecast for the following week issued last Monday, which indicated that the US dollar side of the equation was due for a decline, as its outperformance in 2024 was ready to fade. Accordingly, the EUR/USD price moved towards the 1.0888 resistance level and since the start of trading this week, it has been moving in a narrow range waiting for strong factors, stabilizing around the 1.0855 level at the time of writing the analysis.
In general, the call was based on the belief that although the US dollar was still favoured, some consolidation of gains would be required, and this would allow the EUR/USD exchange rate to rise. This happened, and this week is likely to witness more of the same performance. In this regard, UBS analysts say, “The US dollar index is struggling to break above the 105 level. While additional dollar gains are still possible in the short term, we also see limits to US dollar gains.”
During the trading session on Friday, March 1, we can see some opportunistic rises in the exchange rate of the euro against the US dollar, with rebalancing occurring at the end of the month. According to Credit Agricole analysts, “The end of February may witness selling in US dollars by real money investors who are rebalancing their global stock portfolios.” In fact, months during which global stock markets rose typically saw the US dollar come under pressure at the end of the month on a daily basis. This is due to the rebalancing of hedging flows.”
At the same time, US markets continue to record all-time highs, supported by the Magnificent Seven technology stocks and Nvidia's AI stocks. Therefore, this could lead to some good dollar selling by the end of the month as portfolio managers rebalance their foreign exchange exposure. Looking at specific levels in the EUR/USD exchange rate, we would not be surprised to see further position strengthening above 1.0775, which is the support zone. Ultimately, we note that the pair has not closed below here on a weekly basis since early December.
Will the Euro rise in the coming days?
In this regard, Quek Sir Liang, market analyst at United Overseas Bank, says: “In general, as long as the 1.0775 level (the previously strong support level at 1.0760) is not breached, the euro may approach the 1.0895 level again.” However, the upside potential beyond this level (1.0895) is likely to remain limited; “At this point, the next major resistance at 1.0935 seems out of reach,” the analyst adds. Analysts also said, “The EUR/USD pair appears to be already overvalued, and it will require a renewed expansion of the EUR/USD exchange rate and/or further tightening of the yield spread to German bonds to see the pair rise on a sustainable basis.”
According to data from the Economic Calendar, the main event for the euro this week is the release of inflation data. On Thursday, German inflation figures will be released, each state separately, with the largest slice at 09:00 GMT, culminating in the full German figure at 13:00. (The forecast is 2.6% year-on-year). Obviously, if there is any inflation surprise in the Eurozone release on Friday, it will have been signalled by the German release, so don't be surprised if Thursday is the most important day for the euro.
On Friday, the markets are looking for the headline Eurozone inflation rate to be 2.9% year-on-year for February, down from 3.3% in January. However, a downside surprise would boost bets on the European Central Bank cutting interest rates, which would weaken the euro. Moreover, Upside surprises would resist rate cuts and confirm the euro's recent resilience against the pound and the US dollar.
EUR/USD Technical analysis and forecast:
According to the performance on the daily chart below, the price of the currency pair EUR/USD is stable around the recent upward rebound gains, and for the general trend to turn bullish. Technically, the bulls must move with the currency pair towards the psychological resistance of 1.1000 as soon as possible. As we mentioned before, this requires a weakness in the results of the important American economic data this week, which is represented by the announcement of the Federal Reserve’s preferred US inflation reading and the reading of the US economic growth rate. On the other hand, over the same period, if the price of the euro/dollar returns towards the support level of 1.0750, there will be a threat to the current attempts to bounce back higher.
In general, as we mentioned on the direct trading recommendations page, we still prefer selling the Euro/Dollar from every rising level.
Ready to trade our daily Forex forecast? Here’s a list of some of the best regulated forex brokers to check out.