The EUR/USD pair remains within its monthly opening range as traders await the European Central Bank’s (ECB) upcoming rate decision. The pair recently failed to sustain a move above the former support zone near the April low at 1.0601, snapping a series of higher highs and lows from the previous week. This indecision reflects growing anticipation around the ECB’s policy stance and its potential impact on the Euro.
ECB Policy and Impact on EUR/USD
The ECB is expected to lower its benchmark interest rate from 3.25% to 3.00%, a move that could weigh on the Euro if accompanied by signals of further easing in 2025. Conversely, a hawkish tone from ECB President Christine Lagarde emphasizing caution about additional rate cuts could lend support to the Euro by tempering expectations for prolonged monetary easing.
At the same time, the US Consumer Price Index (CPI) data, set to be released this week, is unlikely to significantly influence EUR/USD. Market consensus expects the core inflation rate to remain steady at 3.3% for November, suggesting limited directional cues for the pair from the U.S. economic side.
Technical Outlook for EUR/USD
EUR/USD pushed above the April low at 1.0601 earlier this month but has struggled to sustain its upward momentum. A lack of follow-through above the resistance region between 1.0580 (78.6% Fibonacci extension) and 1.0610 (38.2% Fibonacci retracement) could lead the pair to retest lower levels. Key support zones include:
- 1.0448 to 1.0480: This range encompasses the 2023 low and 100% Fibonacci extension, representing the immediate downside target if selling pressure intensifies.
- 1.0370: A break below this 38.2% Fibonacci extension could open the door to the yearly low at 1.0333.
On the upside, sustained momentum above 1.0610 could push EUR/USD toward:
- 1.0660: A 61.8% Fibonacci extension level.
- 1.0710 to 1.0770: Resistance clusters near the 50% and 38.2% Fibonacci extension levels.
- 1.0830 to 1.0880: A broader zone defined by 23.6% Fibonacci retracement and extension levels.
Outlook and Key Events
The ECB rate decision and President Lagarde’s commentary will be critical for EUR/USD’s direction in the coming days. Traders should also watch technical levels closely, as the pair’s movement within the current range suggests a potential breakout either higher or lower following the policy announcement.
Additionally, other significant market events, such as the Bank of Canada rate decision and updates on the Australian and British economies, could influence broader risk sentiment and indirectly affect EUR/USD trading. For now, the pair remains tethered to its opening range, with traders awaiting clarity from the ECB.
