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EURUSD analysis and price prediction for today, 2022 and beyond: Will it fall to parity?

EURUSD analysis and price prediction for today, 2022 and beyond: Will it fall to parity?

How do analysts see the EURUSD moving in the coming days and years? We look at the rate drivers and the latest EURUSD analysis and price predictions from experts to help inform your trading.

The euro has come under downward pressure since Russia’s invasion of Ukraine on 24 February and the shift to a risk-off environment in response to concerns about the global economy, with growing Chinese Covid-19 lockdowns, along with hawkish US Federal Reserve policy.

The EURUSD dropped to the five-year low of 1.05. The prospect of a recession set off by Russia threatening to suspend exports of gas to Europe loomed over the market.

What is the outlook for the EURUSD rate in this environment? Is there potential for parity?

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EurUsd analysis 2022

The Russian-Ukraine conflict pulled the euro lower at a time when the currency had been expected to rise in anticipation of the European Central Bank (ECB) tightening the region’s fiscal policy. While the ECB took steps towards tightening in its March meeting, German allocated spending on energy and defense in response to the war.

Russian gas supplier Gazprom announced on 27 April that it has halted supplies to Poland and Bulgaria because they did not pay in rubles (RUB), increasing the threat that Russia could cut off deliveries to other countries more reliant on gas such as Germany. Poland primarily generates its electricity from coal and has gas inventories in storage. But a suspension of supplies to Germany would have an impact on the eurozone’s economic growth as the country would need to ration its gas inventories. That could force the ECB to restrain some of its hawkishness on raising interest rates.

Hawkish comments in April from ECB officials had raised expectations that the bank could end net asset purchases in late June or early July ahead of an interest rate hike in July, which was bullish for the euro's future prediction.

The EurUsd outlook is likely to remain weighted towards the downside, with the potential for the European currency to drop to parity with the US dollar.

Building economic pessimism and a clearly disadvantageous monetary policy divergence between the ECB and the Fed places the EUR at a clear risk of testing its early-2017 low of 1.0341 during the first half of 2022.

If Russia shuts off energy flows, the bloc’s industrial complex may have to heavily reduce output, flipping the eurozone into recession. The Bundesbank estimated that an embargo on Russian energy would lead to a 2% contraction in German GDP in 2022. This would pave the way to a test of parity for the EUR as eurozone financial outflows mount due to a worsening economic outlook, which forces the ECB to put off hikes.

How do analysts see the market moving in the coming months and years? Below, we look at some of the latest projections.

EurUsd Prediction 2022: What Do Experts Predict?

According to global macro models and the expectations of analysts’ from Trading Economics, the pair may consolidate the actual lows. By the end of the year, the price may trade at 1.06.

Long Forecast is more pessimistic than Trading Economics. The price will fall below $1 by the end of the year, for the first time in two decades. The lowest price 0.963 will be hit in November according to the Economy Forecast Agency.

PandaForecast.com is quite optimistic about the pair’s future. By the end of the year, the price will be able to reach the highs recorded at the beginning of 2022. The same EurUsd price prediction is offered by Societe Generale and Commerzbank.

According to EUR analysis by Dutch bank ING, as of the end of April the options market priced in a 35% probability that the EUR/USD pair could hit 1.00 before the end of the year.

ING Bank forecast EurUsd to trade at 1.10 by the end of 2022.

Analysts at Citibank were tactically bearish in their euro analysis against the US dollar, as well as commodity currencies such as the Australian, New Zealand, and Canadian dollars, and their EUR to GBP forecast. Their six to 12-month EUR/USD forecast is 1.10, with a euro long-term forecast at 1.12.

Foreign exchange analysts at ABN AMRO have revised their forecasts for the Euro, although they still anticipate further downside from here.

ABN AMRO had predicted the Euro was on course to fall to parity against the Dollar in 2022, but they have since acknowledged recent developments make this target too low.

"We reviewed our base case scenario and indicated that EUR/USD could drop to parity on safe-haven buying for the US dollar. Since then, a lot has changed, and investor sentiment has improved as well," says Georgette Boele, Senior FX Strategist at ABN AMRO.

In a 'fine tuning' of their expectations for global markets ABN AMRO says they now expect investor sentiment to be "cautious as opposed to negative", and as a result now think that there is less upside for the dollar versus the euro.

EUR/USD Price Prediction 2023

2023 projections vary. One source expects the pair to trade at the lows of 2002, while another one sees the pair at the highs of 2014. Have a look.

In 2023, the overall market trend is expected to be bullish according to Long Forecast. Still, the pair won’t be able to reach the highs of previous years. The pair will be still at the lows of 2002.

PandaForecast.com predicts a solid uptrend that will lead the EUR/USD price to the highs of 2014. The volatility degree won’t exceed average levels.

ING’s EURUSD price forecast for 2023 is 1.15 with a steady increase during each quarter.

CIBC expects the pair to trade at 1.16 by the end of 2023, while Scotiabank’s price forecast is 1.12.

Note that analyst forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

What drives the Euro / US Dollar Currency Pair

The EUR/USD trend depends on what stage of the cycle the global economy is at. During a recession, the demand for safe-haven assets, including the US dollar, increases. As a result, the eurodollar goes down.

During a recovery from a recession, investors are not that focused on preserving the money. Retail investors search for ways to multiply the deposit. At this stage, the fundamentals driving the EUR/USD currency pair are the GDP growth rates and the monetary policy of central banks.

A strong economy is a strong currency. The rapid rebound of GDP after the recession is a reason to buy securities of the country. In particular, the belief that the US economy will fully recover from the 2020 recession in the second quarter of 2021 and exceed its potential level in 2022 contributed to the S&P 500 rally by 18% from January to early August. As a result of the capital inflow into the US stock market, the US dollar was strengthening.

The GDP rate is a reliable indicator but, unfortunately, lagging. The GDP report is published a month or month and a half after the end of the quarter. Therefore, it is very difficult to determine whose economy is growing faster at a particular time, which doesn’t provide a clear picture of the current economic situation to investors. That is why forex traders have to monitor some leading indicators, such as the US and Eurozone PMIs.

The more the economy heats, the more likely the central bank to phase out the quantitative easing program and hike the interest rates. As a result, the assets denominated in the local currency grow more attractively. That is why the US dollar is currently strengthening against a basket of major currencies.

To understand the Fed’s intentions, one should track such indicators as inflation and unemployment rate. When these indicators reach the thresholds set by the Fed, the central bank starts scaling back monetary stimulus. In this case, the greenback will grow in value.

Speeches of central bank representatives are important in forecasting the EUR/USD exchange rate. The officials’ comments give a clue on how the central banks’ policies could change, and investors could develop trading strategies based on this.

EUR/USD Trading Tips

  1. A necessary condition to look for buy opportunities in the long term is the sync trends in the global economy. If the US GDP features robust growth, but China and the euro area face problems, look for sell opportunities.
  2. Monitor the global financial markets. If the S&P 500 and oil are rallying up simultaneously, it is a reason to buy the Euro versus US Dollar. If the stock index is growing and the black stuff is falling in value, or both financial assets are depreciating, it is relevant to sell the EURUSD.
  3. Study the history of the financial asset’s quotes. An example that took place in the past may emerge in the future as a potential EUR/USD price movement.
  4. Use technical indicators in trading the EUR/USD to determine the current market state and key support/resistance levels. If the Moving Averages often cross the EURUSD chart, the market is trading flat. If the price chart is above the EMA, the trend is bullish; if the price is below the indicator, the underlying trend is bearish.
  5. Use Japanese chart patterns and western chart patterns like head and shoulders, double top and bottom, or triangles to identify entry and exit points.
  6. Do not try to use all popular trading strategies; you’d better find the one that suits you best.
  7. Always observe the rules of your online trading system.

EUR/USD price history

The EURUSD features quite high volatility. In the beginning, the EUR/USD currency pair was trading below parity. However, starting from 2002, the euro has never been below $1. The euro-dollar all-time low is 0.82; the record high is close to 1.604.

In 2020, the global economy faced a recession, which lasted for only two months. Because of the panic in financial markets, the demand for greenback sharply increased. As a result, the EURUSD dropped to a level of 1.064, the lowest since April 2017.

Central banks launched colossal monetary incentives of trillions of dollars to support their economies. The Fed was even called crazy because of a sharp federal funds rate cut from 1.75% to 0 and the start of the Quantitative Easing at a monthly pace of $120 billion. The Federal Reserve balance sheet was growing rapidly, approaching $9 trillion, and the US dollar weakened against a basket of major currencies. In particular, the euro, from January to March, was almost 16% up and reached $1.234.

In late 2020, the euro was expected to be trading up. Many banks suggested the EURUSD should have exceeded 1.25 in 2021. Some aggressive bulls expected the euro around $1.3. In reality, things turned out to be different. Due to the slow vaccination in the EU, which turned into new lockdowns and a double recession, the euro collapsed to 1.1705.

Thanks to vaccines, investors became reassured in the global economic recovery. Furthermore, the EURUSD buyers were again encouraged to invest in Euro Dollar by a successful vaccination campaign in the EU and the Fed’s unwillingness to recognize a surge in US inflation. The pair was up to 1.226 in late May. Bulls again were aiming at 1.25, but the FOMC June projection broke the uptrend again. The Fed started talking about a potential federal funds rate hike in 2022, which encouraged investors to buy the US dollar.

Final words

It’s important to remember that any long-term forecasts, even the EUR/USD forecast, or any other currency pair, are too unreliable to believe in. Too many factors may affect the rate of the currency pair, 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 this currency pair is something for you, and you believe in the future of the Euro vs. US Dollar pair, first, you need to decide on a suitable trading strategy for you and work it out first on a demo account, and then on a real account.

A great reason to open a trading account with CAPEX.com! We provide a user-friendly trading app with an outlook for novices as well as experienced traders and investors.

EUR/USD Analysis and Forecast FAQ

Will EUR/USD go up or down?

Long-term forecasts are unreliable. However, the EUR/USD pair follows certain long-term trends. So, if you look at the price chart, you will notice the price repeats its actions over the long term. For short-term trades, you should check fundamental factors that usually affect the EUR/USD rate.

Will the euro go up in 2022?

According to price predictions, the euro will more likely fall against the US dollar in 2022.

What influences the EUR to USD exchange rate?

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, among other factors of influence, are called fundamental; in addition to them, there are also technical ones.

Is USD up or down next year?

Analysts believe the EUR/USD pair will rise in 2023. It means that the US dollar will depreciate against the euro in the forex market.

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.

The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

The research analyst is not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.

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