EUR/USD Forecast: A Weaker Dollar in 2021 Makes Sense

Based on the knowledge that investors have at a given moment, they always make prices with a certain expectation about the future. For example, currency rates are the macroeconomic prospects of a country or region, and the price paid for shares usually implies an expectation about future earnings and sales development.

Professional market parties closely follow the financial news and continuously process new information, including economic forecasts and other expectations. Based on this, the market arrives at an average expectation for a share or currency pair’s price development. In our case – the dollar versus euro.

Specifically, they are subject to (measurable) underlying interest rate differences, inflation, unemployment figures, trade, and capital flow for exchange rates. Simultaneously, a large part of the pricing is also related to ‘event’ risks that cannot be gauged in advance and changing market sentiment. Let’s go more in-depth in this Euro to Dollar forecast.

The article covers the following subjects:

History of the EUR/USD Pair

The Euro (EUR) is a fairly young currency that was born in 1999. The single European currency has replaced a whole galaxy of the EU countries’ national currencies: The Deutsche mark, the French franc, the Italian lira, and others. Therefore, one of the euro’s features is its susceptibility to macroeconomic statistics of the entire Eurozone and individual EU countries’ indicators.

The European currency was officially introduced into non-cash circulation on January 1, 1999, and on January 1, 2002, banknotes and coins were introduced into cash circulation. In terms of the volume of use in international payments, the euro is second only to the US dollar. It is also the second most popular (after USD) reserve world currency. At the time of the official start of trading, the EUR/USD rate was in the 1.1800 area.

Since the beginning of trading in 1999, the EUR/USD pair has undergone significant changes. In the first two years, the euro’s prospects were still vague, and the quotation was declining, reaching a minimum of around 0.8200. The pair then rallied for seven years, reaching an all-time high of 1.6000 in 2008. In subsequent years, due to the banking crisis’s influence and various problems in the Eurozone, the pair corrected significantly.

To check how has the rate of EUR/USD changed over time and EUR/USD current price, please follow this link to the extended historical price chart.

Sharp Moves of the Dollar in 2020

In terms of market sentiment, 2020 has been a very illustrative year. During the first coronavirus wave in March, the market was unpleasantly surprised by the severity, magnitude, and impact of the coronavirus pandemic, causing investors to flee to the dollar as a safe haven.

Initially, the coronavirus was thought to be “a Chinese problem only.” Still, as the virus began to spread faster worldwide – locking up economies around the world – the dollar exchange rate was recalibrated in no time.

A similar revision took place three months ago but in the opposite direction. When pharmaceutical company Pfizer released positive vaccine news in early November, the dollar fell in value due to the disappearance of the need for a safe haven.

In both cases, the market reaction was apparent, but that is not always the case. Take the announced financial support packages from the European Central Bank (ECB) this year. Whereas in the past, the availability of more euros often caused downward pressure on the euro, such packages resulted in an upward price movement this year.

Coronavirus support was “suddenly” perceived as positive by the market. According to investors, the ECB showed it was doing everything it could to prevent companies from collapsing and safeguard employees’ jobs.

Precisely because of the occurrence of unforeseen market conditions and the sometimes-surprising market reaction to them, our starting point is that you should always take price estimates with a grain.

For example, at the end of 2018, many market parties anticipated a weaker dollar, but in 2019 the dollar picked up with the US-Chinese trade war as a catalyst. That created a lot of uncertainty, causing capital to flow to safe havens like the dollar. Such events are difficult to envision, and this was especially true in recent years with a fickle character like Donald Trump at the helm in the United States.

EUR/USD Current Rate

The current rate of the EUR/USD pair is $1.22539. Below, you can see an interactive chart from Forex in real-time:

Characteristic Features of the EUR/USD Pair

The EUR/USD pair belongs to the major currency pairs (majors) and is characterized by increased liquidity. This is not surprising, as it includes two of the world’s major reserve currencies: USD and EUR. It is in the euro/dollar that the largest volume of transactions is made during daily trading on the Forex market (approximately 20% of the total volume).

The behavior of the EUR/USD pair is a kind of indicator showing the comparative state of the US and EU economies. If the US economy is growing steadily, and problems arise in the EU, EUR, this might cause a EURO to US dollar fall. Conversely, if there is a decline in growth rates in the US and the Eurozone demonstrates good performance, the EUR/USD pair will grow. Let’s consider the main trading characteristics of this pair:

• Active trading hours – the pair is traded around the clock except for weekends. It is most active during the European and American trading sessions. It is at this time that the largest trading volumes take place, and the main movements of the EUR/USD pair take place.
• Volatility – the EUR/USD pair is characterized by medium volatility. During the release of important data, the pair is capable of making strong movements from 100 points and above. But in general, if you look at the historical data, the average daily volatility of the EUR/USD pair is about 80 pips.
• Spread is one of the main advantages of this pair. Due to the highest liquidity, the spread for the EUR/USD pair is minimal. On popular ECN accounts, the spread is usually less than 1 pip.

The Dollar in 2021: More Predictable?

Perhaps the direction of the dollar will become a little easier to predict under President Biden. First of all, financial markets are counting on the new US president to run less internationally and deal more diplomatically with trade disputes. This provides more peace and security in the financial markets, reducing the need for a haven such as the dollar.

Also, Biden is expected to spend (a lot) of money to continue to stimulate the US economy, including post-corona, which will further increase the US’s debt position. The fact that interest rates will remain low for a longer period also plays a role: at the most recent meeting of the Federal Reserve, Chairman Jerome Powell hinted that he would not have an interest rate hike until mid-2023.

All of this leads to an estimate that capital flows towards emerging markets and currencies will continue to flow at the US dollar expense. Countries such as Indonesia and Mexico have aggressively lowered their interest rates, but interest rates in these countries are still considerably higher than in the United States.

Besides, countries such as China, South Korea, and Taiwan have had the coronavirus outbreak reasonably under control for some time now. In combination with optimism about the arrival of COVID vaccines, this means that investors are, in any case, moving to more risky markets.

EURUSD Technical Analysis

To determine global trends and key levels, we’ll do a technical analysis of the biggest time frame for the EURUSD.

We saw a stable bearish trend on the EUR to USD monthly price chart for over ten years. Then, the pair has been consolidating in the form of a triangle since the beginning of 2017.

The EURUSD‘s expected trading range will be located within the triangle marked with purple lines in the coming years. So, our further forecast will be based on the assumption that the price won’t break the pattern’s upper and lower limits in the medium term.

If it does, we’ll have a clear signal of the beginning of a trend movement. The lower limit’s breakout will continue the bearish trend while the upper limit’s one will point to the euro’s significant bullish potential.

EURUSD price prediction for next three months

To predict the price movement in the next three months, we’ll conduct a technical analysis of the EURUSD’s weekly chart.

EURUSD quotes reached the triangle’s upper edge and the trend line at the end of 2020. So, the future price isn’t likely to grow. MACD and RSI indicators point indirectly to an eventual reversal.

Similar values, displayed as two peaks, were observed during the last rise in 2017 — 2018. Not only the curves but also the histograms look identical.

The euro’s projected value will most probably range from the previous local minimum at 1.17 USD (red line) to the triangle’s upper edge at 1.23 USD.

The EUR to USD‘s reversal will be fully confirmed once the chart has updated the previous local minimum and fallen below the red line.

In an alternative scenario, the euro may cross the trend line and break upwards amid a solid bullish potential. In that case, the previous significant maximum at 1.234 US dollars (green line) will be a price target. If the price chart consolidates above that level, we’ll have a clear indication of a new uptrend’s start.

However, the alternative scenario is less likely than the first one which implies moving within a triangle.

What will be the price of euro in 2021?

Now let’s make a realistic forecast for the year 2021. Having studied the price history and the changes in Bollinger Bands width, I built candlestick projections for each month based on the scenario that implies a pullback from the triangle’s upper edge.

The analysis of the previous downside local wave suggests that a projected fall may last till the end of the year. The market will break the previous low at 1.17 USD and confirm bears’ power in the nearest months. Support at 1.14 USD will be a new price target.

The downtrend’s potential may get exhausted towards the autumn, and the pair might not continue its downward movement. So, the market may turn flat.

However, the support levels may be retested, and a local bearish wave may resume as early as the end of 2021 — the beginning of 2022. I can presume that the price target for 2022 will be at the triangle’s lower edge in the range of 1.08 — 1.09 USD.

Month	EURUSD price
	Minimum	Maximum
May 2021	1,185	1,227
June 2021	1,178	1,22
July 2021	1,169	1,212
August   2021	1,157	1,198
September   2021	1,141	1,188
October   2021	1,115	1,197
November   2021	1,140	1,183
December   2021	1,132	1,171

EURUSD technical analysis is presented by Mikhail Hypov.

Euro/dollar weekly price forecast as of 24.05.2021

The euro-dollar reached the Target Zone 3, 1.2200 — 1.2184, in the medium-term uptrend. The buyers didn’t consolidate the price above the zone. As a result, the price rolled down below the resistance and started a correction.

If the correction continues, the price could move to the trend border zone 1.2069 — 1.2051. After the trend border is tested, one could look for new purchases according to the pattern. The upside target will be level 1.2231.

If the price breaks out the trend key support, we shall enter euro sell trades with the downside target in the Target Zone 2, 1.1893 — 1.1875.

EURUSD Trading ideas for the week:

Buy according to the pattern in the Target Zone 1.2069 — 1.2051. TakeProfit: 1.2231. StopLoss: according to the pattern rules.

Technical analysis based on margin zones methodology is presented by an independent analyst, Alex Rodionov.

Read on to find out the EUR/USD forecast for the upcoming years!

EUR/USD Forecast 2022

Below is a EUR/USD prediction chart for 2022:

Month	Open	Low-High	Close	Mo,%	Total,%
2022
Jan	1.316	1.286-1.326	1.306	-0.8%	7.6%
Feb	1.306	1.287-1.327	1.307	0.1%	7.7%
Mar	1.307	1.280-1.318	1.299	-0.6%	7.0%
Apr	1.299	1.266-1.304	1.285	-1.1%	5.8%
May	1.285	1.285-1.328	1.308	1.8%	7.7%
Jun	1.308	1.273-1.311	1.292	-1.2%	6.4%
Jul	1.292	1.292-1.337	1.317	1.9%	8.5%
Aug	1.317	1.291-1.331	1.311	-0.5%	8.0%
Sep	1.311	1.281-1.321	1.301	-0.8%	7.2%
Oct	1.301	1.249-1.301	1.268	-2.5%	4.4%
Nov	1.268	1.268-1.309	1.290	1.7%	6.3%
Dec	1.290	1.266-1.304	1.285	-0.4%	5.8%

Source: Longforecast.com

EUR/USD Forecast 2023

Below is a price forecasting chart for the EUR/USD pair for 2023:

Month	Open	Low-High	Close	Mo,%	Total,%
2023
Jan	1.285	1.266-1.304	1.285	0.0%	5.8%
Feb	1.285	1.249-1.287	1.268	-1.3%	4.4%
Mar	1.268	1.240-1.278	1.259	-0.7%	3.7%
Apr	1.259	1.255-1.293	1.274	1.2%	4.9%
May	1.274	1.255-1.293	1.274	0.0%	4.9%
Jun	1.274	1.223-1.274	1.242	-2.5%	2.3%
Jul	1.242	1.224-1.262	1.243	0.1%	2.4%
Aug	1.243	1.215-1.253	1.234	-0.7%	1.6%
Sep	1.234	1.215-1.253	1.234	0.0%	1.6%
Oct	1.234	1.215-1.251	1.233	-0.1%	1.6%
Nov	1.233	1.178-1.233	1.196	-3.0%	-1.5%
Dec	1.196	1.154-1.196	1.172	-2.0%	-3.5%

Source: Longforecast.com

Long-Term Euro to USD Forecast 2025-2030

Any long-term forecasts for 2025-2030, even for the EUR/USD pair or any other currency pair, are too unreliable to include in our predictions. This Euro to Dollar forecast would be pure speculation. For this reason, we will not provide prediction charts beyond 2023. Too many factors may affect the rate of currency pairs and the EUR/USD projection, and it’s best to be up-to-date with what’s happening in the global arena in order to make realistic and reliable predictions. In the next section of our article, we have described in detail what factors may affect the quotes of the EUR/USD pair.

Which Factors Affect the Quotes of the EUR/USD Currency Pair?

The EUR/USD rate is the ratio of the currencies of the two largest economies in the world – the EU and the USA. Therefore, important economic and political news from the EU and the US directly affects the euro-dollar rate. These factors of influence are called fundamental; in addition to them, there are also technical ones. Let’s consider both those and others in more detail:

Fundamental Factors

There are several important economic indicators for the US and EU. The most significant indicators affecting the course of a pair include the following:

• Change in interest rates of the ECB and the Fed (Interest rate)
• Unemployment Rate
• Data on jobs created in the US (Nonfarm Payrolls)
• Growth rate of GDP (GDP)
• Inflation indices (CPI, PPI)
• Industrial production (Industrial Production index)
• Retail Sales
• Trade balance (Trade Balance)
• Consumer Confidence Index
• Indices of business sentiment (ISM, IFO)
• Speeches by top officials – press conferences of the heads of the ECB and the Fed, speeches, and comments by leading politicians from the EU and the United States. For example, Trump’s tweets could provoke significant movement in a currency pair.
• Political events – various reshuffles in the government, elections, popular unrest, internal political instability (e.g., Brexit)
• Force majeure – extraordinary events, natural disasters, man-made disasters, terrorist attacks, epidemics

Technical Factors

• Active trend – an essential technical factor for trading is the presence of an active trend. In an uptrend, purchases are preferable; in a downtrend, sales are recommended, in a sideways trend (range), trading in both directions from the boundaries of the price range is appropriate.
• Important support and resistance levels are historical highs and lows on the price chart. These are important price reference points for analyzing and predicting the future movement of the pair.
• Price patterns – various patterns of continuation or reversal of a trend from classical technical analysis, candlestick patterns, Price Action patterns.

Is EUR/USD Still a Good Investment?

The EUR/USD currency pair is still quite young; its trading life began quite recently – in 1999. But despite their youth, this pair confidently took first place in terms of the volume of transactions on Forex. Due to its enormous liquidity, projection, availability, and low spread, the pair enjoys well-deserved popularity among traders. Below is a EUR/USD prediction chart for 2021:

Month	Open	Low-High	Close	Mo,%	Total,%
2021
Feb	1.214	1.194-1.230	1.212	-0.2%	-0.2%
Mar	1.212	1.193-1.229	1.211	-0.1%	-0.2%
Apr	1.211	1.184-1.220	1.202	-0.7%	-1.0%
May	1.202	1.202-1.250	1.232	2.5%	1.5%
Jun	1.232	1.232-1.282	1.263	2.5%	4.0%
Jul	1.263	1.235-1.273	1.254	-0.7%	3.3%
Aug	1.254	1.212-1.254	1.230	-1.9%	1.3%
Sep	1.230	1.227-1.265	1.246	1.3%	2.6%
Oct	1.246	1.246-1.302	1.283	3.0%	5.7%
Nov	1.283	1.279-1.317	1.298	1.2%	6.9%
Dec	1.298	1.296-1.336	1.316	1.4%	8.4%

Source: Longforecast.com

But what does the EUR/USD forecast predict for the distant future? It’s important to remember that any long-term forecasts, even the EUR/USD forecast, or any other currency pair, are too unreliable to make predictions for. Too many factors may affect the rate of currency pairs, and it’s best to be up-to-date with what’s happening in the global arena in order to make realistic and reliable predictions.

If you do decide that trading with this currency pair is something for you, and you believe in the future of Euro vs Dollar, first, you need to decide on a suitable trading method for you and work it out first on a demo account, and then on a real account. A great reason to create a free demo account on LiteForex! LiteForex has fact-checked information and a user-friendly platform with an outlook for novices as well as experienced traders and investors.

By the time of transactions, you can trade as follows:

• Intraday – trading without carrying over the position to the next day. It is characterized by small Stops and Profits, requires a lot of time for trading and strict discipline, and is available even on a small deposit.
• Medium-term (Swing-trading) – the duration of transactions from several hours to two-three days. More significant Stops and Profits take a little less time and require a more substantial trading account size.
• Long-term – trades are held for several weeks or even for the next 6 months. This trading style is more suitable for investors.

Price chart of EURUSD in real time mode

Source: https://www.liteforex.com/blog/analysts-opinions/eurusd-forecast-and-price-prediction/