Home EUR/USD Forecast: Near 1-yr Top Amid Economic Divergence

EUR/USD Forecast: Near 1-yr Top Amid Economic Divergence

  • The German government increased its forecast for this year’s economic growth.
  • Capital goods spending in the US decreased more than expected.
  • The current odds for another quarter-point Fed rise on May 3 are 77%.

Today’s EUR/USD forecast is bullish. On Thursday, the euro traded near a one-year high against the dollar as Europe’s robust economy contrasted with the US’s looming recession.

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On Wednesday, Germany boosted its forecasts for growth once more. This lift came after a study revealed that consumer confidence had increased steadily.

According to its spring economic estimates released on Wednesday, the German government increased its forecast for this year’s economic growth from 0.2% to 0.4%.

The government is slightly more bullish with the latest forecasts than the five economic institutions which produce the Joint Economic Forecasts. They anticipate 0.3% economic growth in 2023.

Contrarily, the most recent US statistics released overnight showed that capital goods spending decreased more than anticipated. The report fueled concerns about a recession. The ongoing struggles over raising the US debt ceiling and First Republic Bank’s continuing decline did little to improve the situation.

The ECB (European Central Bank) might maintain its hawkish stance, further supporting the euro. This is due to the robust Eurozone economy and underlying inflation that is still rising.

Meanwhile, the persistent mismatch between US inflation and growth puts additional pressure on the Fed to tighten policy. The current odds for another quarter-point rise on May 3 are 77%. However, this is considered the peak, with up to two quarter-point cuts for the year’s end.

EUR/USD key events today

There will be a number of key economic releases from the US, including GDP data, the initial jobless claims report, and the pending home sales report.

EUR/USD technical forecast: Bulls rejected above the 1.1075 resistance

EUR/USD technical forecast
EUR/USD technical forecast chart

In the 4-hour chart, the EUR/USD pulled back sharply after attempting to break above the 1.1075 key resistance level. This shows that the price was rejected above this key level. However, bulls are still in control as the price exceeds the 30-SMA and the RSI exceeds 50.

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Therefore, we might see another attempt to break above this resistance. A break above would make a higher high. Bears might return to push the price below the SMA if the bulls fail to go above the resistance. The price will likely retest the trendline support.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.