Euro’s Outlook Hinges on ECB Guidance; Trade Setups on EUR/USD, EUR/GBP, EUR/JPY

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The European Central Bank’s Thursday meeting is likely to be a subdued affair, with markets widely expecting interest rates to remain unchanged for the fourth consecutive gathering. For this reason, investors should closely monitor President Lagarde’s press conference – her statements may provide valuable insights into the monetary policy outlook.

Lagarde is likely to embrace a neutral stance, refraining from sending signals that could inadvertently create unrealistic expectations in either direction. Although disappointing growth data over the past couple of months may argue for a more dovish position, policymakers may opt for caution in the face of stalled progress on disinflation.

To provide some context, January’s CPI in the Eurozone topped estimates, reinforcing the argument that consumer prices are not yet on a sustained downward trend, with rapid wage growth keeping service sector inflation stickier than anticipated. Against this backdrop, the ECB will avoid any commitment to a pre-set course that could raise premature market hopes, stressing that decisions will be data-dependent.

In terms of potential scenarios for the euro, any indication that the ECB’s easing measures are not imminent and could be delayed to the latter half of the year could spark a hawkish repricing of interest rate expectations. This would be bullish for the common currency. Conversely, any hint of potential early rate cuts could elicit an opposite response, weighing on the euro.

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EUR/USD FORECAST – TECHNICAL ANALYSIS

EUR/USD rallied on Wednesday, breaking above its 50-day simple moving average, and reclaiming the 1.0900 handle. If this bullish move is sustained in the coming days, buyers may gain confidence to launch an attack on 1.0950, with a potential focus on 1.1020 thereafter.

On the flip side, if the pair loses vigor and retreats back below the 1.0900 mark, attention is likely to shift to confluence support at 1.0850. Bulls need to vigorously defend this floor; failure to do so might precipitate a pullback towards 1.0790. On further weakness, all eyes will be on 1.0725.

EUR/USD PRICE ACTION CHART

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EUR/USD Chart Created Using TradingView

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of clients are net long.




of clients are net short.

Change in Longs Shorts OI
Daily -13% 12% -6%
Weekly -11% -6% -9%

EUR/GBP FORECAST – TECHNICAL ANALYSIS

EUR/GBP has been in a downtrend since November, but the intensity of the selloff has eased, with prices perking up and approaching resistance near 0.8575. To enhance sentiment towards the euro, bulls need to convincingly breach this barrier – achieving this could trigger a rally towards 0.8610, followed by 0.8640.

Conversely, if EUR/GBP is rejected at current levels and begins to reverse, support thresholds will come into play at 0.8530 and subsequently at 0.8500. Prices are expected to stabilize around this area during a downturn before a potential reversal, but a breakdown could lead to a decline toward 0.8450.

EUR/GBP PRICE ACTION CHART

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EUR/GBP Char Creating Using TradingView

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EUR/JPY FORECAST – TECHNICAL ANALYSIS

EUR/JPY has lost ground in recent days after failing to clear trendline resistance at 163.50 earlier in the week. If losses accelerate in the coming trading sessions, confluence support emerges around 161.50. Should this technical floor fail, the spotlight will be on the 160.40-160.00 range, followed by 159.00.

Alternatively, if buyers regain control and trigger a meaningful rebound, primary resistance can be identified at 163.50, as previously noted. It’s too early to determine if bulls will gather the strength to take out this barrier, but if they do, a potential move towards last year’s peak near 164.30 could be in the cards.

EUR/JPY PRICE ACTION CHART

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EUR/JPY Chart Created Using TradingView

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