EUR/USD forecast: Forex Friday | May 1, 2026

The near-term dollar forecast took a hit yesterday on the back of the Japanese intervention and hawkish-leaning ECB and BoE meetings. But the US dollar need not fall too far from here. If anything, I am expecting a swift recovery especially against currencies of economies that rely on oil imports. Crude prices have resumed higher after yesterday’s drop halted a sharp rally. But with the Strait of Hormuz still shut, this should keep crude prices elevated and undermine the EUR/USD forecast.

 

EUR/USD forecast remains tiled to downside: here’s why

 

The move higher in EUR/USD off the back of chatter around a June hike from the European Central Bank felt a touch overdone to me. If anything, it had more to do with dollar softness in the wake of the intervention drama in USD/JPY than genuine euro strength. That leaves the breakout looking a bit vulnerable.

 

The broader backdrop in the eurozone isn’t exactly reassuring. The data flow has started to lean in a stagflationary direction—growth is losing momentum while inflation expectations remain sticky. You can see that in the slump in Germany’s consumer sentiment and softer business surveys across the bloc. Add in elevated energy costs, and it’s not hard to see why the outlook feels a bit fragile.

 

In normal circumstances, rising rate expectations would give the currency a decent lift. But this isn’t a normal cycle. If the European Central Bank tightens into a weakening growth backdrop, it risks doing more harm than good. That’s not exactly a recipe for sustained euro strength, even if the market starts leaning towards a more hawkish path.

 

 

From a tactical point of view, I’m watching that 1.1750 area on the EUR/USD chart quite closely. If the pair struggles to hold above there it could unwind fairly quickly. A move back through 1.1670 wouldn’t surprise in that scenario. That said, given the strength we’ve seen intraday, I’d want clearer signs of buyers getting caught out before leaning too heavily into that view.

 

Looking ahead: Key US data set to impact EUR/USD forecast

 

Among the data highlights will be the ISM Services PMI on Tuesday. This is one of the most important gauges of US economic activity, covering the largest part of the economy: services. It’s widely tracked because it can shift expectations for growth and Fed policy, and as it is forward-looking. Through its employment component it offers some pre-NFP leading indication, too.

 

Speaking of US Nonfarm Payrolls, this will be released on Friday, May 8.  The report is the headline event of the week and typically the biggest market mover. The current narrative of low-hire, low-fire has kept the US stock markets ticking along nicely, with investors not yet too concerned about the inflationary implications of the energy shock on the world economy. Following last month’s big surprise of 178K, are we going to see another surprise? A strong print will be bearish for the EUR/USD forecast, while a weak number should provide it support.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R