June 15, 2025 – Written by Frank Davies

STORY LINK Euro to Dollar Forecast: 1.16 by 2026, 1.20 by 2027 say Investment Bank

Commerzbank forecasts that the Euro to Dollar exchange rate (EUR/USD) will advance to 1.16 at the end of this year and 1.20 by the end of 2026.

Morgan Stanley expects stronger EUR/USD gains to 1.25 by the second quarter of 2026.

The dollar was subjected to renewed selling during the week with the currency index sliding to the lowest level since February 2022. In this environment, EUR/USD surged to 43-month highs above 1.16.

The US currency did secure a reprieve late in the week as risk appetite dipped and oil prices surged after Israel attacked Iran’s nuclear facilities. EUR/USD retreated to near 1.15, but with strong buying on dips.

ING expects caution will prevail initially; “The key difference from previous Israel-Iran standoffs is that nuclear facilities have now been targeted, and while oil production does not seem to be affected just yet, markets have to add in a bigger risk premium given the crucial role of Iran in global oil supply.”

The latest US inflation data was weaker than expected with core consumer prices increasing 0.1% in May with the year-on-year increase held at 2.8%.

Markets remain confident that the Federal Reserve will not cut interest rates at this week’s meeting, but with greater confidence in significant cuts later in the year.

According to Commerzbank; “While it is unlikely that Trump will dismiss Fed Chair Powell before the end of his term, he may nominate a Fed chairman more in line with his views next year.”

Markets are still fretting over the impact of tariffs and tensions will increase during the reminder of June.

Aviva Investors senior economist Vasileios Gkionakis noted the structural concerns as investors fret about persistent fiscal deficits, weakening foreign demand for government debt, and institutional uncertainty.

He added; “The US has been enjoying a significant privilege for decades. This is now shifting, with the US likely to run large fiscal deficits for years and against a backdrop of an extended net international investment position.”

ABN looked at multiple risks contained in the proposed Budget Bill.

According to the bank; “The overall impact on the economy would not be favorable, and the repercussions for financial markets could be significantly worse. This reputational damage has arguably been a major factor driving the dollar’s devaluation in recent months.”

Morgan Stanley commented; “We think that this weakening trend continues, and we now forecast the DXY to fall an additional 9% over the next 12 months to 91, with USD weakness most pronounced against its safe-haven peers – EUR, JPY, and CHF.”

Investment banks also see scope for further inflows into the Euro area.

BNP Paribas has calculated that if Dutch and Danish pension funds reduce dollar exposure to 2015 levels as a share of total assets under management, they have a further $217 billion to sell.

HSBC added; “Dutch pension funds are the largest in the EU and their investment behaviour often indicates broader European investment flows. If European investors continue to increase FX hedge ratios, it will likely provide further support to EUR-USD.”

BNP also agrees that ECB policy is close to turning and is positive on the Euro; “Our analysis suggests there is much more still to come.” It maintains a EUR/USD target of $1.20.

Commerzbank noted; “our economists expect the German fiscal package to provide a significant boost in the coming year. After many years of struggling, this should encourage investors to take a closer look at the euro area again, which should benefit the euro.”

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I wrote on 8^th June that the best trades for the week would be:

1. Long of the GBP/USD currency pair after a daily (New York) close above $1.3616. This did not set up.
2. Long of Silver in USD terms. This closed 0.78% higher over the week.
3. Long of the S&P 500 Index pair after a daily (New York) close above 6,142. This did not set up.

The overall win of 0.78% equals a loss of 0.26% per asset.

Last week was basically mildly risk-on, with stock markets rising and the US Dollar falling on more positive than expected US inflation, PPI and consumer sentiment data. However, all that changed in the early hours of Friday in the Middle East as news broke of a very strong Israeli strike on Iran’s key military figures and its nuclear materials and scientists. This sent markets into a risk-off direction.

The Israeli strike has led to what could be described as all-out war between Israel and Iran, with Iran firing powerful ballistic missiles at Israeli population centers, and Israel in turn hitting hard at the military, the nuclear program, and increasingly at Iranian oil facilities.

This war has been long awaited, and it seems clear that the Israeli attack was acquiesced in by the Americans, who so far at least are not helping with offensive actions, although they are likely assisting in Israel’s strong antimissile defense, which is continuing to intercept over 90% of projectiles. However, the missiles which get through cause serious damage and fatalities, although at a level the Israeli public can probably accept, at least for a few more days or weeks.

It seems clear that the Iranian regime and nuclear program is in serious jeopardy, the nuclear program more so, and Iran has a limited supply of perhaps 2,000 ballistic missiles that it may not be able to replenish. The big question is whether the Americans will join in the drive to destroy Iran’s nuclear program, or whether Iran might sue for a negotiated settlement that would be acceptable to the USA.

The progress of the resolution of these questions is likely to be the major factor influencing markets over the coming week, but there are also major central bank meetings that could impact several G7 currencies.

Last week’s most important data releases were:

1. US CPI (inflation) – this was lower than expected, with annualized CPI expected to rise from 2.3% to 2.5%, but rising to only 2.4%.
2. US PPI – this key inflation metric was expected to rise by 0.2% month-on-month, but increased by only 0.1%, reinforcing the relatively low CPI data.
3. US Preliminary UoM Consumer Sentiment – this was far better than expected, suggesting surprising consumer resilience.
4. UK GDP – lower than expected, declining by 0.3% month-on-month, while a decline of only 0.1% was expected. This will raise recession fears for the UK, with the Bank of England facing a tough challenge as it will struggle to cut its relatively high interest rate while the high inflation rate persists.
5. US Unemployment Claims – as expected.

The coming week has some very high-impact data releases, including policy meetings at four major central banks, which can significantly affect the Forex market.

This week’s important data points, in order of likely importance, are:

1. US Federal Reserve Policy Meeting
2. Bank of Japan Policy Meeting
3. Bank of England Policy Meeting
4. Swiss National Bank Policy Meeting
5. US Retail Sales
6. UK CPI (inflation)
7. New Zealand GDP
8. UK Retail Sales
9. UK Unemployment Claims
10. Australia Unemployment Rate

The most impactful events on the Forex market will likely be the top five items.

The comments from the central banks will be closely watched, and the only rate change that is widely expected to happen will be at the SNB, which is likely to be cut by 0.25%.

Thursday is a public holiday in the USA and New Zealand.

For the month of June 2025, I forecasted that the EUR/USD currency pair would increase in value. The performance of this forecast so far is:

As there were no unusually large price movements in Forex currency crosses over the past week, I make no weekly forecast.

The Euro was the strongest major currency last week, while the US Dollar was the weakest. Volatility increased last week, with 26% of the most important Forex currency pairs and crosses changing in value by more than 1%. Next week’s volatility is likely to be higher as we will get several major central bank policy releases.

You can trade these forecasts in a real or demo Forex brokerage account.

Last week, the US Dollar Index printed a bearish candlestick which made the lowest weekly close since February 2022. There is clearly a long-term bearish trend in the US Dollar. Bulls have two reasons to hope for higher prices though:

1. The support level at 97.67, which is continuing to hold so far.
2. The outbreak of full-scale war between Israel and Iran early on Friday which triggered a run into safe havens, which to some extent still includes the US Dollar, although increasingly precious metals and some other currencies are taking on that role.

I think it makes sense to be trading in line with the long-term trend which will be short of the greenback, but only after the price has either got established below the support level at 97.67, or alternatively if the price is rejecting a key resistance level above, but the latter scenario is extremely unlikely to play out this week.

The EUR/USD currency pair reached a new 3.5 year high last week, well above the big round number at $1.1500, before giving back some gains on Friday as news emerged of the outbreak of war between Israel and Iran. The Euro was the strongest major currency last week while the US Dollar was the weakest.

A minor factor against bulls is that the resistance level at $1.1569 has continued to hold.

It seems unlikely that even if the war escalates, that the US Dollar will gain strongly, so I have faith in the long-term bullish trend here. This currency pair has an excellent record of respecting the long-term trend, so I am happy to be long here over the coming week.

Gold in US Dollar terms made its highest ever daily close last Friday, but only by a very small amount. This is basically bullish, but looking at the daily chart below, you could say that the price action is only testing a triple top.

The primary precious metal got a boost Friday from the outbreak of war between Israel and Iran, which triggered a flight into safe havens, although not an especially strong one.

It seems unlikely that the war will end any time soon, and there has been a strongly bullish long-term trend for a long time, so being long of Gold over this week will probably be a good bet.

More cautious traders might want to wait for another bullish breakout, maybe even above the record high just below $3,500.

Silver in US Dollar terms again reached a new thirteen-year high last week, above $36 per ounce, but a look at the weekly candlestick shows that it is a doji, which typically signifies indecision. Nevertheless, there is a clearly strong bullish trend in precious metals generally, although silver was rising even before Gold made its major upwards movement.

I am not strongly optimistic that Silver will rise further this week, but it seems more likely to rise than fall.

More cautious traders might want to wait for a new long-term high to be reached, or at least a strong daily close, before entering a new long trade here.

Looking at the daily price chart for WTI Crude Oil below, a lot of interesting and bullish things can be seen:

1. The bullish double bottom at around $55.00.
2. The cup and handle chart pattern which followed the double bottom, or at least something very close to that pattern.
3. The accelerating bullish momentum of recent days.

Of course, crude oil got a major boost Friday as news emerged of what is frankly the outbreak of all-out war between Israel and Iran. This long-anticipated hot conflict outbreak has dramatically pushed up the price of crude oil, as can be seen in Friday’s candlestick. However, bulls might want to beware the large upper wick as crude oil gave up some of its gains later in the day.

There is despite the potential blow-off top another reason to be even more bullish: since markets closed Friday, Israel has begun hitting Iranian energy targets, trying to establish an equation between deliberate Iranian fire on Israeli population centers and the destruction of Iran’s oil production capability.

I think Crude Oil is likely to rise over the coming week, although if a diplomatic solution to the war is found soon – which seems very unlikely – the price would drop dramatically.

I prefer to wait for a new 6-month high close before going long of WTI Crude Oil, so I will only enter a new long trade after a daily close above $80.43.

I see the best trades this week as:

1. Long of the EUR/USD currency pair.
2. Long of Gold in USD terms.
3. Long of Silver in USD terms.
4. Long of WTI Crude Oil if there is a daily (New York) close above $80.43.

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The US dollar is sitting on a confluence of support that extends over a decade. It’s a must-see level that could affect the entire forex market in the weeks ahead.

Watch today’s video for all of the details, including how I’m trading the DXY, EURUSD, GBPUSD, USDJPY, and XAUUSD.

US Dollar Index (DXY) Forecast

The DXY broke down last week, finally offering a thorough retest of 97.70. In previous videos, I’ve discussed how the index didn’t quite test the level in April, which left it open as a potential target.

Buyers stepped in on Friday to close the intraweek gap at 98.58. The DXY retreated after the gap closed but remains above 97.70 as we enter next week.

Another critical factor for the US dollar is the ascending channel from 2011. Although it’s difficult to pinpoint the exact placement on the daily time frame, the 14-year channel support is near 97.70.

That makes the next few weeks critical for the DXY. We either get a significant macro bottom developing in the 97.70 region, or the USD is heading much lower this year.

As always, it’s essential not to get ahead of ourselves. Until the DXY can break its 2025 trend line resistance or break below its 97.70 support, the US dollar will remain range-bound.

EURUSD Forecast

EURUSD broke above key resistance at 1.1530 on Thursday, flipping the level to new support during Friday’s session.

As we’d expect, bulls stepped in to defend the area before the weekend. However, EURUSD faces its most significant test in weeks as the DXY bounces from the 97.70 region.

With that said, a EURUSD bearish reversal can only take place if the pair closes back below the 1.1530 region. It will also need to occur on higher time frames, such as the daily and weekly charts.

Keep in mind that the March trend line at 1.1440 is also incredibly significant. The euro bounced from this level several times in May and June, so it’s one to watch.

Key resistance is 1.1660, with 1.1530 as support. As mentioned above, if EURUSD loses the 1.1530 support level, it will open up downside targets, including 1.1440, and potentially lower.

GBPUSD Forecast

GBPUSD refuses to back down from 1.3630 despite showing a nearly identical pattern to the 2024 top.

As discussed in recent videos, the current (potential) rising wedge resembles the 2024 price action before GBPUSD topped out. The RSI is also showing early signs of bearish divergence.

Simultaneously, the DXY is testing the confluence of support I shared above.

But despite these bearish factors, GBPUSD hasn’t confirmed a breakdown. For that to occur, areas like 1.3530 will need to break, along with the more significant 1.3430 support level.

Until then, GBPUSD is range-bound between 1.3430 support and 1.3630 resistance.

USDJPY Forecast

I touched on USDJPY in last week’s forecast. And although the pair hasn’t done much to confirm my ideal setup, it also hasn’t invalidated it.

My ideal scenario for USDJPY starts with the Yen Basket we discussed last time. Currently, the chart is holding above its 2020 trend line support, but a weekly close below could introduce significant yen weakness.

At the same time, USDJPY has to claw its way back above 145.40 on the high time frames. If the two charts satisfy these requirements simultaneously, we should have a highly probable USDJPY long to work with.

Until then, I’m not interested in USDJPY, given the choppiness since May.

XAUUSD (Gold) Forecast

Gold broke out from a bull flag on June 2nd and tested prior resistance as new support on the 9th. That retest triggered last week’s rally, which fell just short of breaking the $3,430 resistance area.

If gold bulls can break $3,430 next week, the next stop could be an all-time high above $3,500. XAUUSD is clearly benefiting from the multitude of global risks and uncertainties.

Above $3,500 it’s anyone’s guess, as gold will once again enter price discovery. However, as $3,500 became a factor, I’d be willing to bet that $4,000 would become a target and potential resistance if visited.