Euro Forecast: EUR/USD Vulnerable to ECB Rate Cut

Euro Outlook: EUR/USD

EUR/USD may stage further attempts to test the January high (1.0533) ahead of the European Central Bank (ECB) interest rate decision as it snaps the series of lower highs and lows from last week.

Euro Forecast: EUR/USD Vulnerable to ECB Rate Cut

EUR/USD retraces the decline from the February high (1.0529) as the Euro Area Consumer Price Index (CPI) points to sticky inflation, with the headline reading printing at 2.4% in February versus forecasts for a 2.3% reading.

Join David Song for the Weekly Fundamental Market Outlook webinar.

David provides a market overview and takes questions in real-time. Register Here

It remains to be seen if the ECB will respond to the data print as the Governing Council argues that ‘most measures of underlying inflation suggest that inflation will settle at around our target on a sustained basis,’ and the rebound in EUR/USD may turn out to be temporary as the central bank is anticipated to further unwind its restrictive policy.

Euro Area Economic Calendar

The ECB is expected to deliver another 25bp rate-cut in March as the ‘risks to economic growth remain tilted to the downside,’ and the updates coming out of the central bank may drag on the Euro should President Christine Lagarde and Co. keep the door open to implement lower interest rates.

With that said, EUR/USD may track the flattening slope in the 50-Day SMA (1.0391) as it continues to trade within last month’s range, but the exchange rate may establish a new trend should it push above the January high (1.0533).

EUR/USD Chart – Daily

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

EUR/USD snaps the recent series of lower highs and lows following the failed attempt to close below 1.0370 (38.2% Fibonacci extension), with a breach above the January high (1.0533) opening up the 1.0580 (78.6% Fibonacci extension) to 1.0610 (38.2% Fibonacci retracement) region.
Next area of interest comes in around the December high (1.0630), but lack of momentum to hold above the 1.0448 (2023 low) to 1.0480 (100% Fibonacci extension) zone may keep EUR/USD within the January range.
Need a close below 1.0370 (38.2% Fibonacci extension) to bring the February low (1.0211) on the radar, with the next area of interest coming in around the January low (1.0178).

Additional Market Outlooks

US Dollar Forecast: USD/JPY Rebound Retrained by Slowdown in US PCE

AUD/USD Negates Ascending Channel amid Five-Day Selloff

Canadian Dollar Forecast: USD/CAD Jumps with Trump Tariffs to Hit in April

GBP/USD Climbs to Fresh Monthly High to Approach Channel Resistance

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.