EUR/USD Forecast: Weekly Outlook – April 13, 2025
Last week, global financial markets witnessed dramatic changes, deeply influenced by US trade policy. A significant rise in US 10-year Treasury yields and the S&P 500's rally contrasted sharply with a near 4% decline of the US dollar against the euro.
Key Takeaways:
- The EUR/USD forecast is uplifted more by dollar weakness than euro strength.
- Traders are more focused on trade wars than on diverging monetary policies.
- Anticipate heightened market volatility amid tariff and inflation fears.
Dollar and Bonds Tumble Amid Stagflation Concerns
The turbulence in the markets can be traced back to the recent developments in Washington. While a 90-day relief on reciprocal tariffs gave a temporary boost to stocks, it did not lift the dollar, which faced continued decline owing to stagflation worries.
Tariffs on several countries have reduced, but China’s tariff rate jumped a whopping 145%, impacting US economic dynamics. For American consumers and businesses, the consequences, particularly regarding inflation, are increasingly severe.
Analysts expect the Federal Reserve to respond with multiple rate cuts this year, possibly three or four, to alleviate economic pressure, although high inflation rates raise doubts about the Fed's ability to cut rates effectively.
EUR/USD Forecast: Focus on Dollar and Trade War
The EUR/USD pair is currently showing potential for growth, not primarily rooted in euro resilience. After hitting 1.1474, it settled at 1.1360, falling short of the pivotal 1.1500 mark but may return to it soon.
The current environment reveals underlying skepticism about the US dollar rather than optimism around the euro. The trading dynamics indicate the euro’s support fundamentals are tested as market confidence in US trade policies falters.
What to Expect This Week
With Easter approaching, a temporary market slowdown is expected. However, the pressures from tariffs, inflation, and job insecurity remain evident. Analysts suggest potential upward movement for the EUR/USD to 1.1500, albeit with caution.
This week will also spotlight US retail sales data, which may surprise positively, indicating consumer preparations ahead of expected price hikes.
In contrast, upcoming corporate earnings will draw attention amid fears of retaliatory trade actions.
Technical EUR/USD Forecast: Key Levels to Watch
The trading landscape shows minimal resistance for the EUR/USD, especially regarding the 1.1500 mark. Key support levels are between 1.1095 to 1.1210, with 1.1000 serving as a crucial benchmark. A dip below 1.0935 could signal bullish dominance fading.
In conclusion, the current EUR/USD forecast is heavily influenced more by dwindling confidence in the US dollar than any significant recovery for the eurozone. As market volatility persists amid trade uncertainties and economic inflation, traders are advised to proceed with caution.
Written by Fawad Razaqzada, Market Analyst