EUR/USD Coils Ahead of ECB Interest Rate Decision

Euro Forecast: EUR/USD

EUR/USD seems to be coiling ahead of the European Central Bank (ECB) interest rate decision as it holds above the 50-Day SMA (1.1511), and the exchange rate may track the positive slope in the moving average should it break out of the range bound price action from last week.

EUR/USD Coils Ahead of ECB Interest Rate Decision

EUR/USD extends the rebound from the monthly low (1.1557) to stage a two-day rally, and the Euro may continue to appreciate against its US counterpart even though the European Union struggles to reach a trade deal with the Trump administration.

Euro Area Economic Calendar

Looking ahead, the ECB is expected to keep Euro Area interest rates on hold after delivering a 25bp rate-cut in June, and the central bank may pursue a wait-and-see approach over the coming months as ‘staff see real GDP growth averaging 0.9 per cent in 2025.’

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In turn, indications of a change in regime may keep EUR/USD afloat as the ECB seems to be at the end of its rate-cutting cycle, but the Euro may face headwinds if the Governing Council keeps the door open to implement lower interest rates.

With that said, failure to defend the rebound from the monthly low (1.1557) may push EUR/USD toward the June low (1.1347), but the exchange rate may continue to track the positive slope in the 50-Day SMA (1.1511) as it holds above the moving average.

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView  

• EUR/USD bounces back ahead of the 50-Day SMA (1.1511) to carve a series of higher highs and lows, with a move above the 1.1690 (78.6% Fibonacci extension) to 1.1750 (78.6% Fibonacci retracement) zone bringing the June high (1.1830) on the radar.
• A breach above the September 2021 high (1.1909) opens up the 1.2010 (100% Fibonacci extension) to 1.2040 (161.8% Fibonacci extension) region, with next area of interest coming in around 1.2230 (78.6% Fibonacci extension),
• However, a close below 1.1560 (100% Fibonacci extension) may push EUR/USD back toward the 1.1390 (78/6% Fibonacci extension) to 1.1440 (61.8% Fibonacci extension) area, with the next region of interest coming in around the June low (1.1347).

--- Written by David Song, Senior Strategist

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