By Ion Jauregui – Analyst at ActivTrades
The European Central Bank has decided to pause its rate-cutting cycle after seven consecutive reductions over the past twelve months, leaving the deposit rate at 2%, the refinancing rate at 2.15%, and the marginal lending facility at 2.4%. This move, largely priced in by the markets, reflects the ECB’s growing caution in the face of inflation that has officially reached its 2% target but may rebound if certain fiscal and geopolitical risks materialize.
Christine Lagarde’s message has been interpreted with a hawkish tone. Although both headline and core inflation have eased — the latter standing at 2.3% — the ECB warns that surprises may still occur. Massive defense spending, fiscal imbalances, and international trade tensions (such as tariffs recently signed by Trump with Japan) could disrupt the current equilibrium.
Markets have reacted calmly: the EUR/USD barely moved a tenth of a percent after the decision, while implied interest rates in the money markets have lowered the odds of another rate cut in September. Now, only a symbolic 5 basis point cut is priced in at most.
Technical Analysis
Overall trend: Sideways to bearish in the short term; bullish in the long term.
Key support levels:
Key resistance levels:
The pair attempted to break higher last week but failed, starting this week with a bearish tone. As long as the price holds above key support, the bullish trend may continue. A daily close below the first support could trigger a move toward the point of control (POC) zone at 1.0419. The daily RSI is in oversold territory at 38.95%, while the MACD shows signs of turning lower, indicating a loss of bullish momentum.
There is growing speculation that the ECB's rate-cutting cycle may be over. Within the ECB, figures like Isabel Schnabel are calling for patience, while others, such as Philip Lane and Luis de Guindos, still don’t rule out a final adjustment if September projections show economic weakness.
In this context, the price range that began from the point of control zone toward recent highs appears to be losing steam. Going forward, the evolution of the EUR/USD will depend on inflation trends, European fiscal policy, and the ECB’s response to tariff tensions with the United States and other global challenges as summer draws to a close.
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The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance and forecasting are not a synonym of a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk. Political risk is unpredictable. Central bank actions can vary. Platform tools do not guarantee success.
The European Central Bank has decided to pause its rate-cutting cycle after seven consecutive reductions over the past twelve months, leaving the deposit rate at 2%, the refinancing rate at 2.15%, and the marginal lending facility at 2.4%. This move, largely priced in by the markets, reflects the ECB’s growing caution in the face of inflation that has officially reached its 2% target but may rebound if certain fiscal and geopolitical risks materialize.
Christine Lagarde’s message has been interpreted with a hawkish tone. Although both headline and core inflation have eased — the latter standing at 2.3% — the ECB warns that surprises may still occur. Massive defense spending, fiscal imbalances, and international trade tensions (such as tariffs recently signed by Trump with Japan) could disrupt the current equilibrium.
Markets have reacted calmly: the EUR/USD barely moved a tenth of a percent after the decision, while implied interest rates in the money markets have lowered the odds of another rate cut in September. Now, only a symbolic 5 basis point cut is priced in at most.
Technical Analysis
Overall trend: Sideways to bearish in the short term; bullish in the long term.
Key support levels:
- 1.1488: technical and psychological reference level
- 1.1275: recent July low
Key resistance levels:
- 1.8291: short-term high
- 1.2278: next resistance level
The pair attempted to break higher last week but failed, starting this week with a bearish tone. As long as the price holds above key support, the bullish trend may continue. A daily close below the first support could trigger a move toward the point of control (POC) zone at 1.0419. The daily RSI is in oversold territory at 38.95%, while the MACD shows signs of turning lower, indicating a loss of bullish momentum.
There is growing speculation that the ECB's rate-cutting cycle may be over. Within the ECB, figures like Isabel Schnabel are calling for patience, while others, such as Philip Lane and Luis de Guindos, still don’t rule out a final adjustment if September projections show economic weakness.
In this context, the price range that began from the point of control zone toward recent highs appears to be losing steam. Going forward, the evolution of the EUR/USD will depend on inflation trends, European fiscal policy, and the ECB’s response to tariff tensions with the United States and other global challenges as summer draws to a close.
*******************************************************************************************
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and such should be considered a marketing communication.
All information has been prepared by ActivTrades ("AT"). The information does not contain a record of AT's prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance and forecasting are not a synonym of a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk. Political risk is unpredictable. Central bank actions can vary. Platform tools do not guarantee success.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.