How could the ECB meeting impact EUR/USD?

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In a scenario where Lagarde sticks to the Bank’s “data-dependent approach”, pushing back against expectations of an early policy pivot, the Euro is likely to attract a strong bid against the US Dollar, as the markets would perceive it as a hawkish hold.

However, a dovish shift in Lagarde’s tone, acknowledging softening wage pressures, could take the wind out of the recent EUR/USD recovery.  

Her comments will hold the key for determining the timing and scope of future interest rate cuts, significantly impacting the value of the main currency pair.

Dhwani Mehta, FXStreet’s Senior Analyst, offers a brief technical outlook for trading the Euro on the ECB policy announcements: “The EUR/USD pair broke through the critical 50-day Simple Moving Average (SMA) at 1.0857 on Wednesday, opening the door for further upside. The 14-day Relative Strength Index (RSI) holds comfortable above the midline, backing the pair’s bullish potential.”

“Acceptance above the 1.0950 level is likely to refuel the upside momentum toward the 1.1000 psychological level. EUR buyers will then aim for the 1.1050 key level. Conversely, the initial demand area is seen around the 50-day SMA at 1.0857, below which a test of the 1.0835 support will be inevitable. That level is the confluence of the 100- and 200-day SMAs. Further south, the 21-day SMA at 1.0811 could come to the rescue of EUR/USD,” Dhwani adds


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