- The EUR/USD forecasts currently favour the greenback heading into the key interest rate decisions by the ECB and Fed.
Current Setup and Live Chart
The EUR/USD is now acting as a proxy for the full spectrum of events stemming from the energy price shock. Europe is a net importer of energy products, while the US is a net exporter and a safe-haven asset that draws demand in risk-off settings. Currently, the pair is in a tussle between two opposing macro events:
- The energy shock is supporting the USD due to safe-haven flows, the inflationary expectations from higher energy prices, which have led to hawkish Fed repricing and a rise in US real yields.
- EUR support comes from a risk-on sentiment, when oil prices cool and the geopolitical risk premium softens, along with a drop in US real yields.
Eurozone data currently have a negligible role to play. The pair’s primary driver is as follows: oil shock → inflation expectations → Fed rate repricing → USD yields. It can go either way.
EUR/USD Forecasts: Macro Drivers
1) Oil shock
Europe’s import-dependent economy is vulnerable to an oil shock, and the current risk-off environment favors the US Dollar against the single currency. Higher oil prices come at the expense of EU growth and the trade balance, which puts pressure on the Euro. In these conditions, a flight to the safe-haven US Dollar also occurs, producing a double effect.
2) Interest Rates
The ECB and Federal Reserve kept rates unchanged at their March meetings. However, Fed policymakers have begun discussing potential inflationary pressures from the oil shock.
A 25 March Reuters poll of economists still saw the ECB keeping rates on hold in 2026, but there has been a shift. A third now sees at least one rate hike this year, driven by revised upward energy inflation forecasts.
The Fed is set to release its next rate decision on 29 April. While the consensus is to keep rates on hold, focus will shift to the statement’s language and the FOMC Chair’s comments during the press conference. Any hints about “upside risks to inflation” could trigger additional USD demand, sending the pair lower.
On the ECB’s part, the interest rate decision of 30 April and accompanying press conference by the ECB Chair will indicate if the apex bank’s tone is offering a more clear-cut hawkish repricing signal that would put the Euro on bid.
3) Eurozone inflation expectations
Recent survey evidence indicates that higher inflation expectations have emerged in the Eurozone, along with tighter credit conditions. These two do not make a clear case for Euro support, but rather increase the chances of stagflation,even as inflationary pressures heighten.
EUR/USD Price Catalysts
1) Rates + USD reaction
The Fed and the ECB will release their interest rate decisions a day apart. EUR/USD could see sharp reactions if the decisions lead to a significant repricing of inflationary risks. The market will enter these decision days still trading as an oil shock proxy.
2) Geopolitical headlines
The pair is still subject to geopolitical headlines. These headlines directly affect energy price volatility, safe-haven demand, and USD yields. These headlines keep changing and swinging from one end of the spectrum to the other, leaving the pair prone to intraday whipsaws.
EUR/USD Forecast Scenarios
Base case: within the context of a consolidation, the pair still retains downside bias. The most likely pathway is a choppy two-way trade, with sellers fading rallies as long as oil risk remains elevated and USD retains its safe-haven status.
Bull case: the pair will trade higher if oil prices stabilize or retrace, as risk sentiment improves. This will compress the risk premium, lower inflationary expectations, and soften US yields. This scenario will see the Euro start to pick up demand.
Bear case: the EUR/USD will track lower if there is evidence of stagflationary pricing in Europe. The trigger will be a spike in oil prices and a worsening of Eurozone PMI data or credit conditions. Persistent risk-off sentiment and higher US yields in response to hawkish repricing of the Fed’s pathway provide the cleanest signal for this move.
EUR/USD Technical Outlook
Price remains in a choppy consolidation within the price zone that serves as the immediate support (marked in pink). A breakdown of this level ushers in a run towards the 1.1627 neckline of the 13 March and 31 March 2026 double bottom. If there is a further decline, 1.1509 (24 Nov 2025 and 3 April 2026 lows) becomes the next downside target.
On the flip side, the bulls need to defend the current price zone and force a bounce above the trendline resistance to make a case for a reclaim of the 1.1813 resistance (24 December 2025 and 16 April 2026 highs). If this level is uncapped, an advance towards the 1.1921 resistance (10 February high) cannot be ruled out.
