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Home.forex news reportEUR/USD Forecast: Germany’s Spending Plans Fuel Optimism

EUR/USD Forecast: Germany’s Spending Plans Fuel Optimism

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  • The EUR/USD forecast shows a strong euro amid optimism over Germany’s fiscal plans.
  • German parties agreed to change the government’s borrowing limits.
  • Data on Friday revealed a sharp drop in US consumer confidence.

The EUR/USD forecast shows optimism over Germany’s fiscal plans, likely boosting the Eurozone economy. As a result, the euro has held near its recent five-month peak. On the other hand, the dollar remains subdued amid fears of a US recession due to Trump’s trade policies. 

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On Friday, reports revealed that German parties had agreed to change the government’s borrowing limits. Therefore, the 500 billion euro fund proposal might come to life, boosting defense and infrastructure. This, in turn, will support the Eurozone economy and strengthen the euro. 

Meanwhile, the dollar remained weak due to fears of the US recession and downbeat economic data. Trump’s aggressive trade policy changes have raised fears of a sharp slowdown in the US economy. Trump’s tariffs have ignited trade wars that will likely reduce trade in the global economy. Moreover, experts believe these duties will increase inflation, forcing central banks to keep interest rates elevated. 

Therefore, policymakers will likely remain cautious despite soft inflation numbers. Notably, data on Friday revealed a sharp drop in consumer confidence. The lack of confidence in the economy proves investors are worried about the impact of Trump’s tariffs. At the same time, inflation expectations jumped.

EUR/USD key events today

  • US core retail sales m/m
  • US retail sales m/m

EUR/USD technical forecast: Bulls battle to keep control at the 30-SMA

EUR/USD technical forecastEUR/USD technical forecast
EUR/USD 4-hour chart

On the technical side, the EUR/USD price has recovered to retest the 1.0901 resistance level. As a result, it has broken back above the 30-SMA, showing bulls are struggling to keep control. At the same time, the RSI trades above 50, suggesting strong bullish momentum.

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Previously, the RSI had made a bearish divergence that signaled a likely reversal. This allowed bears to return and push the price below the 30-SMA. However, they have failed to make a significant swing below the SMA. If bulls regain momentum, the price will break above 1.0901 to seek new highs. This would allow EUR/USD to go beyond the 1.1001 key psychological level. 

On the other hand, if bears are ready to take charge, the price will stay below 1.0901. Moreover, it might drop to retest the 1.0701 key level.

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