EUR/USD – Bulls maintain control ahead of key event: ECB policy decision
The Euro edged higher on Thursday morning, partially reversing a two-day pullback from a new multi-week high at 1.0915. However, today’s action has been choppy and directionless as traders await the European Central Bank’s (ECB) policy decision later today.
The ECB policymakers are expected to deliver the first rate cut by 25 basis points, reducing the rate from 4.0% to 3.75%. This would signal progress in combating high inflation, although the battle is far from over.
More significant will be the comments from President Lagarde during the subsequent press conference, which will provide more details about the ECB’s next steps, considering the impact of high borrowing costs on the economy and persistent inflation in the services sector.
Overall, a hawkish stance from the ECB—indicating caution rather than readiness to continue easing policy—would be positive for the Euro. Conversely, a dovish view would increase pressure on the currency.
The ECB has faced criticism for waiting for the Fed to act before cutting rates. Today’s action could be seen as a response to such comments and a demonstration of the central bank’s independence. However, the main issue remains the challenge of balancing persistent inflation, which is still above the 2% target, with weakening economic conditions due to high interest rates and the adverse impact of economic sanctions on Russia, which particularly affects Germany, the EU’s largest economy.
Technically, the daily chart is bullish with positive momentum building and moving averages in a bullish setup providing support.
Near-term bias is expected to remain bullish as long as the price stays above the daily Tenkan-sen (1.0852). A break below this level would weaken the near-term structure and allow for a deeper pullback, but the larger bullish trend would remain intact if strong supports at the 1.0800/1.0790 zone (psychological level, 38.2% Fibonacci retracement of 1.0601/1.0915, and daily Tenkan-sen) contain the dips, marking a healthy correction within the uptrend.
Conversely, a sustained break above the recent tops (1.0895/1.0915) would signal bullish continuation and target key barriers around the 1.1000 zone (2024 high and psychological level).
Res: 1.0895; 1.0915; 1.0942; 1.1000
Sup: 1.0852; 1.0841; 1.0795; 1.0758
