- Consumer confidence in the euro area fell in January.
- The ECB is likely to suspend interest rate hikes at its next Governing Council meeting.
- Investors will be scrutinizing ECB President Christine Lagarde’s press conference for any indication of the future direction of interest rates.
On Wednesday, the EUR/USD price analysis took a slightly bullish tilt ahead of the all-important European Central Bank interest rate decision. Additionally, investors were awaiting important PMI data from the euro area and the US.
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On Thursday, investors will be watching ECB President Christine Lagarde’s press conference for important clues about the future trajectory of interest rates.
The consensus is that the ECB is likely to suspend interest rate hikes at its next Governing Council meeting. However, traders expect a total decline of about 130 basis points over the course of the year. Furthermore, there is a nearly 97% chance that the first rate cut will occur in June.
Elsewhere, data released on Tuesday revealed that consumer confidence in the euro area fell in January compared to December.
On the other hand, the dollar depreciated slightly, but remained firm due to the Fed’s cautious stance on interest rate cuts. San Francisco Fed President Mary Daly, in her final remarks before the Jan. 31 policy blackout period, said monetary policy was in “good shape” and it was premature to expect an imminent rate cut. said.
Similarly, Fed Director Christopher Waller emphasized a “cautious and slow” approach to rate cuts. James Kniveton, senior corporate foreign exchange dealer at Convera, noted that the market is no longer expecting an imminent rate cut, which is supporting the dollar.
This trend is consistent with widespread resistance to rate cuts among major central banks. Knibouton added: “We have seen ECB officials push back on their rate cut expectations, as well as the Fed.”
Today’s major events in EUR/USD
- German Flash Manufacturing and Services PMI
- US Flash Manufacturing and Services PMI
EUR/USD Technical Price Analysis: Price approaches key 1.0800 support
On the technical side, EUR/USD broke lower after respecting the key resistance level at 1.0900. As a result, the price is close to retesting the 1.0800 support level. After falling below 1.0900, the price stayed around that level and bounced every time the bears tried to push the price lower.
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However, a significant drop occurred when the price formed a bearish engulfing candle at the 1.0900 level. Now, the price has rebounded and could retest the 30-SMA as resistance. If the SMA holds firm, EUR/USD could reach the 1.0800 support soon.
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