EUR/USD Forecast: What is the EUR to USD Outlook?

The EUR/USD started the week calmly as investors reflected on last week’s Fed decision, rising risks of a recession, and the ongoing energy crisis in Europe. The EUR to USD exchange rate is trading at 1.0497, which is about 0.50% above last Friday’s low of 1.0440.

The pair is in a tight range as investors reflect on the latest interest rate decision by the Federal Reserve. In its statement last week, the Fed decided to hike interest rates by 0.75%, the biggest increase in almost a decade. The officials also hinted that they could hike by either 0.50% or 0.75% in the coming meeting in a bid to fight inflation.

The European Cental Bank (ECB) also had an emergency meeting last week to deliberate the emerging bond crisis in highly indebted countries like Italy and Greece. They agreed to come up with a package to ensure that these countries have access to liquidity.

Still, the biggest risk for the EUR/USD is the ongoing energy crisis in Europe after Russia reduced its natural gas supply to the region. It cut its supplies to Germany by about 60%, forcing the country to switch on its coal plants. Therefore, there is a likelihood that the ongoing consumer and producer inflation will continue rising. 

This week, the EUR to USD exchange rate will react to several important economic numbers from Europe and the US. Markit will publish the flash manufacturing and services PMI data while the US will release the latest new and pending home sales data. Speeches by ECB’s Christine Lagarde and Philip Lane will have an impact on the pair.

EUR/USD forecast

The EURUSD price rose to a high of 1.0600 on Friday and then pared back those gains. It is now trading at 1.0503, which is higher than Friday’s low of 1.0445. On the hourly chart, the pair is slightly below the 38.2% Fibonacci Retracement level. The pair has moved slightly above the 25-period and 50-period moving averages. 

Therefore, the outlook for the EUR to USD is bullish, with the next key level to watch being at 1.0550. A drop below last Friday’s low at 1.0445 will signal that there are still more sellers in the market. As a result, it will continue falling to below 1.04300.