EUR/USD forecast: Forex Friday - February 14, 2025

The EUR/USD forecast has improved a little this week. Not because we have seen any major improvements in European data or a sharp deterioration in US data, but more so because Trump’s reciprocal tariffs won’t be applied immediately after all. Instead, they are set to take effect in April. What’s more, Trump’s tone was far from combative—instead, it had the feel of an opening gambit in a broader negotiation, seemingly aimed at levelling the playing field rather than escalating tensions. Also helping the euro is optimism surrounding a potential peace deal in the Russia-Ukraine conflict. This week’s call between Trump and Putin was apparently positive, with the US President even receiving an invitation to Moscow. Should a deal materialise, it would undoubtedly be a boon for the Eurozone economy, all else being equal. The upside for the EUR/USD may still be capped, however, owing to a stronger US economy and elevated bond yields there. But we could still see the EUR/USD potentially breaking back above 1.05 handle given this week’s renewed optimism. It would help if the soon-to-be-released US CPI undershoots expectations.

Good news on US inflation despite hotter headline CPI and PPI readings

Yesterday’s US PPI report came in hotter than expected, but market attention was firmly on the components that feed into the Core PCE index—the Federal Reserve’s preferred inflation gauge. Despite the headline strength, the underlying details painted a different picture. Weakness in key PPI components, including healthcare and insurance costs, along with a sharp drop in airline fares, suggest that Core PCE is likely to ease. It was a favourable outcome for the Fed given the circumstance. With those softer elements in play, early estimates for Core PCE have been revised down to a more reassuring level. The year-on-year figure is now projected to decline to 2.6%, down from the previous 2.8% estimate.

US retail sales seen falling 0.2% in January

The PCE report is due on Feb 28. Before that, we don’t have much in the wat of key data, barring today’s retail sales, which are expected to drop 0.2% m/m on the headline front (compared to last December’s +0.4% print) and rise 0.3% (vs. 0.4% previously) on the core front.

Next week’s data highlights for EUR/USD forecast

There are not many major data releases next week, except a handful shown in the table below, which only contains data from the US and Eurozone…

US banks will be closed in observance of Presidents' Day on Monday, potentially making for an uneventful day.

Out of all the data releases next week, German ZEW Economic Sentiment (Tuesday) and Global PMIs (Friday) are likely to be the key events that could impact the EUR/USD forecast. The European PMIs are likely to garner the most attention on Friday. Manufacturing PMIs have been improving ever so slightly, but still remain below the expansion threshold of 50.0. The recent upsurge in major Eurozone indices such as the DAX suggests investors are expecting recovery to gather pace, but will this be evidenced in the latest German PMIs?

EUR/USD technical analysis

Source: TradingView.com

The technical EUR/USD forecast has improved this week. After establishing support around the 1.0300 level earlier this week, the pair is now pressing up against key resistance in the 1.0480–1.0500 zone. Just last week, the pair found a solid floor near 1.0200—a level it had previously tested and held above in early January. These higher lows indicate some buying interest, even if the broader technical outlook has not yet turned decisively bullish, with key moving averages, for example, still sloping negatively and price action being confined within a wider pattern of lower highs and lower lows. That said, the bottoming consolidation has alleviated the selling pressure. Still, for a more constructive outlook on the EUR/USD forecast, further bullish momentum would be required. A decisive break above the 1.0480–1.0500 range could suggest a shift in sentiment. We could then be taking about bullish targets at 1.0600 and possibly even 1.0700 thereafter.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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