EUR/USD Forecast: 1.17 Support Holds as ECB-Fed Divergence Eyes 1.18 Break
EUR/USD closed last week at 1.1740, up 1% as euro bulls found support from soft US data and steady ECB...
Quick overview
- EUR/USD closed last week at 1.1740, up 1% due to soft US data and a steady ECB.
- Mixed US economic data, including a drop in durable goods orders and a resilient labor market, suggests no immediate Fed rate hike.
- The ECB maintained rates at 2.00%, with President Lagarde emphasizing a data-driven approach amidst differing views on inflation.
- Key levels to watch for EUR/USD include support at 1.17213 and resistance at 1.17521, with upcoming economic data likely to influence movement.
EUR/USD closed last week at 1.1740, up 1% as euro bulls found support from soft US data and steady ECB. Despite a flat Friday, momentum was slightly up going into a data heavy week.
In the US, June durable goods orders fell 9.6% with transportation down 22.4% (aircraft). While the number beat estimates of -10.8%, it reversed May’s 16.5% gain. Ex-transport core orders rose 0.2%, indicating cautious corporate spending.
Other data was mixed. Initial jobless claims fell, confirming labor market resilience. But S&P Global Manufacturing PMI went below 50, confirming contraction. These mixed signals weakened the case for further Fed tightening and reinforced expectations of no rate hike this week between 4.25-4.50%.
The euro found stability after the ECB left rates at 2.00%. ECB President Lagarde reiterated a data driven approach with hawks and doves at odds over core inflation and slowing growth. While not market moving, the ECB’s cautious tone helped the euro not to fall too much.
EUR/USD Technical Setup: Ascending Channel
Technically, EUR/USD is inside an ascending channel on the 1-hour chart, a medium term bullish structure. The pair is trading at 1.17408, just below the 50-SMA at 1.17521 which is acting as immediate resistance.
Key Levels to Watch:
- Support:
- 1.17213 – Channel support and near term floor
- 1.16787 – Next level if 1.17213 breaks
- 1.16388 – Longer term support zone
- Resistance:
- 1.17521 – 50-SMA, immediate hurdle
- 1.17827 – Channel top and potential breakout zone
- 1.18286 – Higher resistance aligned with previous highs
RSI is at 50.24, neutral. A bounce from 1.17213 or a break above 1.17521 could take us to 1.18286. If the pair goes below 1.17213, bears might take control and target 1.16787.## What to Watch This Week?
Looking ahead, the euro will be driven by a busy economic calendar. In the US:
- FOMC decision (expected to be hold)
- Q2 GDP
- Core PCE
- Nonfarm Payrolls
From the eurozone:
- Inflation reports from Germany, Spain and the EU
- German retail sales
- EU’s first GDP estimate
There’s also renewed focus on US-EU trade. After President Trump said a trade deal had a “50-50” chance before August 1, optimism rose. The EU has prepared €93 billion in retaliatory tariffs, adding pressure to the negotiations. Progress here could help the euro.
Sentiment Snapshot:
- COT Data: Speculators are net long on the euro.
- Retail Sentiment: A very short retail crowd could support further gains via contrarian plays.
EUR/USD Forecast: Decision Time at 1.1750
EUR/USD is at a key zone, with both technical and macro catalysts aligning. If 1.17213 holds and we get good data or hawkish ECB talk, a break to 1.17827 and possibly 1.18286 is likely.
But if eurozone data misses or US prints are strong, the pair could fall, breaking 1.17213 and targeting 1.16787.
Trade Setup:
- Bullish Scenario: Bounce from 1.17213 or break above 1.17521 → Targets: 1.17827, 1.18286
- Bearish Scenario: Break below 1.17213 → Target: 1.16787 → Stop-loss: above 1.17521
For now the euro holds, but this week’s data will decide if 1.18 is back in sight or if bulls need to regroup.
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