- ECB policymakers have shown strong support for a rate cut this week.
- The US central bank kept borrowing costs unchanged on Wednesday.
- The Fed remained cautious due to uncertainty regarding Trump’s policies.
The EUR/USD outlook remains vulnerable as the European Central Bank is expected to cut rates in today’s meeting. Meanwhile, the dollar remained steady after Fed officials unanimously voted to keep interest rates unchanged.
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Recent ECB policymaker remarks strongly support a rate cut this week. Inflation in the Eurozone came in at 2.4% in December, a short distance from the 2% target. On the other hand, the economy has slowed significantly, forcing the ECB to focus more on reviving demand than lowering inflation. Economists believe the central bank will cut rates and signal more to come. Such an outcome would weigh on the dollar and create a divergence in policy outlooks between the Fed and the ECB.
The US central bank kept borrowing costs unchanged on Wednesday despite recent calls from Trump to lower borrowing costs. Policymakers remain worried about inflation, which has paused above the 2% target. Additionally, the Fed remained cautious due to uncertainty regarding Trump’s policies.
If the US president successfully imposes tariffs, demand for local goods will increase. At the same time, manufacturing in the US will surge, boosting the economy. This will translate to higher price pressures, likely forcing the Fed to pause for longer.
EUR/USD key events today
- ECB main refinancing rate
- ECB monetary policy statement
- US advance GDP q/q
- US unemployment claims
EUR/USD technical outlook: Bears pause at the 1.0400 support
On the technical side, the EUR/USD price has paused near the 1.0400 support level after breaking out of its bullish channel. The price trades below the 30-SMA, and the RSI is below 50, suggesting a strong bearish bias.
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The previous bullish move paused near the 1.0500 key psychological level. Bulls attempted to break above but failed even to reach the channel resistance. Soon after, price action showed a surge in bearish momentum with large red candles. This led to a channel breakout and a break below the 30-SMA.
Bears are on the verge of making lower lows. If the price breaches the 1.0400 support, it will fall to the 1.0301 level. The bearish bias will remain strong if the price stays below the 30-SMA and the RSI below 50.
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