The EUR/USD pair trades in positive territory around 1.1755 during the early European trading hours on Friday. The European Central Bank (ECB) kept rates unchanged at its December policy meeting, and its outlook suggested less urgency for further cuts, which has provided some support to the Euro (EUR) against the US Dollar (USD).
ECB President Christine Lagarde emphasized a data-dependent, “meeting-by-meeting” approach. She further stated that the central bank is not pre-committing to any future rate path, though some economists anticipate the rates to remain steady through 2026.
On the USD’s front, anticipation that US President Donald Trump will name a dovish successor to Fed Chair Jerome Powell, whose term ends in May, could drag the Greenback lower and create a tailwind for the major pair. Trump said that he expects the next Fed Chairman to keep interest rates low and never “disagree” with him. The comments are likely to heighten worries among investors and policymakers about Fed independence.
Technical Analysis:
In the daily chart, EUR/USD trades at 1.1755. The 100-day EMA slopes higher at 1.1635, and price holds above it, preserving the medium-term bullish bias. RSI rises to 59.8, confirming improving momentum without overbought conditions. Holding above the EMA would keep the upside path intact.
Price sits above the Bollinger middle band at 1.1738, while the bands narrow, signaling reduced volatility after the recent recovery. The upper band at 1.1820 caps the topside for now, and a daily close above it could extend gains; a drop back under the middle band would expose the lower band near 1.1655. Overall, momentum and trend signals favor buying dips until volatility expands.
(The technical analysis of this story was written with the help of an AI tool)
Euro FAQs
The Euro is the currency for the 20 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%).
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.
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.
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.
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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