EUR/USD Extends Gains as Euro Tests 1.1820 Ahead of IFO Data

Today at 11:00 (GMT+2), attention will turn to February data from the IFO Institute for Economic Research. According to the consensus forecast, Germany’s business climate index may rise from 87.6 to 88.4 points, while the expectations index is seen increasing from 89.5 to 90.5 points. Analysts attribute this to a pickup in investment activity across the EU, including the expansion of defense programs and large-scale infrastructure modernization plans in Germany, as well as technological upgrades of industrial enterprises. Spending on these initiatives could amount to around €45.0–50.0 billion, with €12.0–15.0 billion directed toward rearmament and strengthening defense capabilities. In addition, €10.0–12.0 billion is expected to be allocated to projects focused on digitalizing production processes and introducing energy-efficient technologies in industrial zones. Representatives of the Federal Ministry for Economic Affairs and Climate Action and officials from the Federal Ministry of Finance have previously noted that additional fiscal stimulus and rising public investment should support the industrial sector and strengthen business sentiment in the medium term, while also boosting domestic demand and employment. Around 120,000–150,000 new jobs are expected to be created in 2026. The assessment of the current situation is also projected to post moderate growth in February, rising from 85.7 to 86.1 points. Officials have emphasized that despite ongoing pressure from external demand and high costs, the economy is showing signs of gradual recovery, although the process remains fragile and dependent on global conditions and financial factors.

The positive trend in regional business activity has provided additional support to EUR/USD quotes. According to the latest data, Germany’s manufacturing PMI rose from 49.1 to 50.7 points in February, well above the forecast of 49.6, while the services PMI increased from 52.4 to 53.4 compared with expectations of 52.2. Across the eurozone as a whole, the indicators improved from 49.5 to 50.8 points in manufacturing and from 51.6 to 51.8 points in services, signaling a recovery in activity and supporting the single currency amid improving business sentiment.

In the United States, last week’s key event was the release of December Personal Consumption Expenditures (PCE) data, which showed an acceleration in the annual headline figure from 2.8% to 3.0%, compared with preliminary estimates of 2.9%, and a monthly increase from 0.2% to 0.4% versus expectations of 0.3%. The core indicator adjusted to 2.9% year-on-year from 2.8% and rose from 0.2% to 0.4% month-on-month. Given that this data is a key metric for the Federal Reserve in assessing underlying inflation trends and directly influences market expectations regarding potential changes in the benchmark interest rate, faster growth in spending strengthens the case for a wait-and-see stance by the regulator or even tighter monetary conditions in the near future.

Support and resistance levels

On the daily chart, the Bollinger Bands are attempting to flatten into a horizontal configuration: the price range is expanding to the upside, remaining sufficiently wide for current activity. The MACD is preparing to form a new buy signal, trying to move above the signal line. The Stochastic oscillator shows a similar pattern, rebounding from low levels that had signaled short-term oversold risks for the euro.

Resistance levels: 1.1850, 1.1900, 1.1950, 1.2000.

Support levels: 1.1800, 1.1764, 1.1730, 1.1700.

Trading scenarios and EUR/USD outlook

Long positions can be considered after a confident breakout above 1.1850, with a target at 1.1950. Stop-loss: 1.1800. Time horizon: 2–3 days.

A pullback from 1.1850 as resistance followed by a downside break of 1.1800 could signal an opportunity to open short positions with a target at 1.1700. Stop-loss: 1.1850.