EUR/USD Forecast: Euro on Course for a 4th Monthly Gain of 1.5%

• The Fed is anticipated to raise rates by 25 basis points. 
• The ECB is anticipated to boost rates by 50 basis points.
• Concerns about a severe recession in the eurozone have gone down.

Today’s EUR/USD forecast is bearish. The Euro fell slightly against the dollar on Monday ahead of a flurry of central bank meetings this week, including the Federal Reserve. Traders were particularly interested in the Federal Reserve’s direction for interest rate increases.

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However, the anticipation that the Fed was reaching the end of its rate-hike cycle and that interest rates would not have to rise as high as originally anticipated kept the euro on course for a fourth consecutive monthly gain of 1.5%.

The Fed is anticipated to raise rates by 25 basis points, while the ECB is anticipated to boost rates by 50 basis points.

Despite raising rates at the quickest rate on record for the eurozone, the central bank has so far been unable to bring inflation anywhere close to its 2% target. According to official figures released last week, prices increased 9.2% from a year earlier in December.

The persistent hawkish tone of ECB policymakers and diminishing concerns about a severe recession in the eurozone have helped to underpin the single currency.

A few weeks ago, it appeared like a European recession was inevitable. However, the situation has drastically changed, and investors are now pouring money into the region’s currencies.

Due to warmer temperatures and fully stocked gas storage facilities, there is less worry about power outages and skyrocketing energy costs. This and China’s accelerated economic reopening bodes well for Europe’s export-driven economy.

EUR/USD key events today

Investors will pay attention to German GDP data showing the state of Europe’s largest economy. They are expecting a drop to 0.0% in Q4 from 0.4%.

EUR/USD technical forecast: Bears take charge below the 30-SMA

The 4-hour chart shows EUR/USD trading below the 30-SMA and the RSI below 50. This comes after the price found resistance at the 1.0925 level, where bears took over, sending the price below the 30-SMA and a bullish trendline. This was a sign that bears had taken over. 

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At the same time, the RSI crossed below the 50-line, pointing to a shift in sentiment to bearish. If bears maintain their strength and the price stays below the 30-SMA, we might see it retesting the 1.0775 support level.

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