EUR/USD is up around 0.33% as risk appetite improves as Israel and Lebanon appear ready to enter into peace talks even as hostilities continue. This had an impact on the US dollar, which is in a negative situation and fell by 0.18% on the US Dollar Index (DXY). At the time of writing, the pair is trading near the 1.1700 milestone, up 0.32%.
The euro is gaining amid hopes that peace talks will put pressure on the dollar ahead of US CPI data.
Conflict in the Middle East has been making headlines as economic data fades into the background and waits for attention, and Friday’s report on the U.S. Consumer Price Index (CPI) may be just what economists need to crunch the numbers.
Meanwhile, Israel has stepped up its attacks on Hezbollah as the “fragile” ceasefire between the US and Iran is threatened by Israeli attacks on Lebanon, with the Iranian regime emphasizing that the truce also extends to the Israel-Lebanon border. Israeli Prime Minister Benjamin Netanyahu recently thanked Lebanese Prime Minister Salam’s call as the two countries agreed to start talks next Tuesday in Washington.
The fall in oil prices is a tailwind for the euro as most countries are net energy importers. Moreover, the forceful positive correlation between WTI – denominated in US dollars – caused the dollar to fall, as illustrated by the DXY index, which tracks the behavior of the US dollar in relation to six currencies, the exchange rate of which was 98.82.
US data showed that inflation, while remaining above the Fed’s 2% target, remained subdued at around 2.8% on an annualized basis, as reflected by the Personal Consumer Expenditures Price Index (PCE). Core PCE, the Fed’s main inflation gauge, fell by a tenth from 3.1% to 3%, in line with economists’ projections. Meanwhile, the US economy slowed more than expected by 0.7% in the fourth quarter of 2025, falling to 0.5%.
Other data showed the labor market stabilized following the release of jobless claims for the week ending last Saturday, April 4, with an escalate of 219,000, above forecasts of an escalate of 210,000, up from 203,000. from last week.
Despite the release of solid data and the hawkishness of the FOMC minutes from the last meeting, the EUR/USD pair is expected to continue to gain due to divergences in monetary policy. Market participants suggest that the ECB will tighten policy by 56 basis points at the end of the year.
In Europe, industrial production in Germany unexpectedly fell in February, pointing to a sluggish first quarter despite stronger-than-expected export growth driven by solid demand in Europe.
EUR/USD Price Analysis: Technical Outlook
On the daily chart, the EUR/USD rate is 1.1696. The pair is trading slightly above the clustered 50-, 100- and 200-day plain moving averages (SMAs) around 1.1677, which currently provide near-term support and indicate an improving fundamental tone. Price is also testing the downward resistance trendline established from 1.1929, while the 14-day Relative Strength Index is hovering near 58, suggesting constructive but not yet overbought upside momentum as the pair challenges this pivot region.
On the other hand, immediate support is seen at the rising trendline and the nearby SMA group between 1.1696 and 1.1677, where a break would weaken the emerging bullish bias and open the way to deeper retracements. On the other hand, a sustained move above the downtrend resistance line at 1.1696 would signal a more pronounced bullish breakout, revealing higher levels of recovery in the coming sessions as sellers lose control of the recent downtrend structure.
(The technical analysis for this story was written with the support of an AI tool.)
Frequently asked questions about the euro
The euro is the currency of the 20 European Union countries belonging to the euro zone. It is the second most widely traded currency in the world after the US dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with average daily turnover exceeding $2.2 trillion per day. EUR/USD is the most traded currency pair in the world, accounting for an estimated 30% discount on all trades, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the euro area. The ECB sets interest rates and manages monetary policy. The ECB’s primary task is to maintain price stability, which means controlling inflation or stimulating economic growth. Its basic tool is to raise or lower interest rates. Relatively high interest rates – or the expectation of higher interest rates – will usually benefit the euro and vice versa. The Governing Council of the ECB takes decisions on monetary policy at meetings held eight times a year. Decisions are made by the heads of the euro zone’s national banks and six lasting members, including ECB President Christine Lagarde.
Inflation data in the euro area, measured by the Harmonized Index of Consumer Prices (HICP), is an crucial econometric indicator for the euro. If inflation rises more than expected, especially above the ECB’s target of 2%, this obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to interest rates will typically benefit the euro as they make the region more attractive as a place to park money for global investors.
The published data are used to assess the condition of the economy and may affect the euro. Indicators such as GDP, PMIs for industry and services, employment and consumer sentiment surveys may influence the direction of the single currency. A forceful economy is good for the euro. Not only will it attract more foreign investment, but it may prompt the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is feeble, the euro will likely fall. The economic data for the four largest eurozone economies (Germany, France, Italy and Spain) is particularly crucial as they constitute 75% of the eurozone economy.
The next crucial data release for the euro is the trade balance. This indicator measures the difference between what a country earns from exports and what the country spends on imports over a given period. If a country produces a highly sought after export, its currency will only appreciate in value due to the additional demand generated by foreign buyers wanting to buy those goods. Therefore, a positive net trade balance strengthens the currency and vice versa in the case of a negative balance.
