Category: Forex News, News

Will the ECB Surprise? (Chart)

By Published On: June 6, 20242.9 min readViews: 1000 Comments on Will the ECB Surprise? (Chart)

  • EUR/USD has been under selling pressure since the middle of this week’s trading, falling from the 1.0916 resistance level, the highest for the pair in over two months, to the 1.0855 support level.
  • Overall, EUR/USD is likely to take cues from the ECB decision, as a June cut is priced in, and traders are looking for clues about future policy moves.

Several policymakers have already warned of rate cuts in a row, while economic reports from the region have mostly reflected improvements. With this, Lagarde could confirm her data-driven approach and perhaps signal that inflation is approaching the target, reducing the chances of further rate cuts at least in the next two meetings.

Meanwhile, US jobs data has been mostly downbeat this week, suggesting that there may be no non-farm payrolls report on Friday. This comes after last week’s drop in the US core PCE price index, which already led to a round of US dollar selling, and the previous non-farm payrolls report that came in below estimates. In this case, there could be further weakness in the US dollar if the data is enough to revive talk of three Fed rate cuts later this year.

What is expected for the EUR/USD in the coming days?

In this regard, according to Deutsche Bank analysts, the dollar continues to show strong strength supported by its high yields and geopolitical considerations, while the euro faces headwinds that are likely to keep EUR/USD in a tight range. As summer approaches, the outlook for the dollar remains bullish, while the euro is expected to struggle to break above 1.10 against the dollar, with a greater chance of falling below 1.05.

According to the bank’s Forex Analysis Department, “We started the year on a bullish note for both the US dollar and foreign currencies. Also, analysts suggest that we are sticking to both views as we head into the summer months. Despite the Fed’s hawkish repricing and the outperformance of US growth, the US dollar continues to benefit from a low volatility environment in the FX market. Consequently, this stability is largely due to the remarkable symmetry in monetary policy expectations across developed markets, with many central banks, including the Fed and the ECB, expected to follow similar easing cycles over 2025-26.

EUR/USD Technical analysis and forecast:

EUR/USD recently broke resistance around the minor psychological level of 1.0850 and then rose to the 1.0900 level before pulling back. Technically, the Fibonacci retracement tool on the recent highs and lows shows that the 38.2% to 50% levels extend into this former resistance area, which may now act as support. Also, the 50% Fibonacci level coincides with dynamic support at the moving averages, with the 100 SMA crossing above the 200 SMA to confirm the return of bullish pressure. Furthermore, a larger correction could reach the 61.8% Fibonacci level at 1.0837 but this could be the demarcation line for the decline. Obviously, a break below this level could send EUR/USD to a low of 1.0788 after that.

Meanwhile, the Stochastic indicator is trending higher but is already in overbought territory to indicate weaker bullish momentum soon. Especially, if the Oscillator starts to turn lower. Eventually, the RSI is already moving lower to indicate bearish pressure, so the correction could continue.

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