ECB Coverage Stance Fails to Shock Markets :: InvestMacro

By RoboForex Analytical Division

At its assembly on 18 December, the European Central Financial institution (ECB) left all key rates of interest unchanged, sustaining the deposit facility fee at 2.0%. The choice was broadly anticipated, providing no recent catalyst for significant euro motion. Whereas headline inflation for the eurozone remained shut to focus on at 2.15% in November, the ECB’s up to date projections noticed a slight upward revision for the approaching years, primarily pushed by persistent value development within the companies sector.

Concurrently, the ECB improved its GDP development forecast for 2025–2027. Nevertheless, with the choice totally priced in, it supplied neither extra assist nor strain to the one forex.

The first driver for EUR/USD now stems from US financial coverage. The latest Federal Reserve fee minimize from 4.00% to three.75% has narrowed the yield differential between the greenback and the euro. This reduces the greenback’s rate of interest benefit and makes euro-denominated property comparatively extra enticing, offering a reasonable tailwind for the euro.

Trying forward, medium-term dynamics will hinge on relative expectations for central financial institution coverage. Ought to markets proceed to cost in a extra aggressive easing cycle from the Fed in comparison with the ECB, the euro is prone to discover additional assist. Conversely, any indicators that the ECB is making ready to proactively ease coverage in response to eurozone financial weak spot would restrict the euro’s upside potential.

Technical Evaluation: EUR/USD

H4 Chart:

On the H4 chart, the pair is consolidating close to the breakdown stage of the earlier development channel’s decrease boundary. We anticipate a draw back breakout from this vary and a resumption of the third decline wave, with an preliminary goal at 1.1650.

The MACD indicator technically confirms this bearish outlook. Its sign line is beneath zero and pointing decisively downward, reflecting sustained bearish momentum and potential for additional draw back.

H1 Chart:

On the H1 chart, the market accomplished one other decline wave to 1.1702, adopted by a correction to 1.1737. A brand new downward impulse in the direction of 1.1650 is at present forming. A sustained break beneath this stage would sign the potential for an prolonged third wave, focusing on the 1.1645 space as a neighborhood goal.

This state of affairs is supported by the Stochastic oscillator, with its sign line beneath the 50 stage and trending firmly downwards.

Conclusion

The euro’s trajectory stays extra delicate to shifting US coverage expectations than to the ECB’s predictable stance. Whereas the narrowed rate of interest differential gives near-term assist, the technical construction seems bearish. A decisive break beneath the present consolidation vary may set off a renewed transfer in the direction of the 1.1650–1.1645 assist zone.

Disclaimer:

Any forecasts contained herein are primarily based on the creator’s specific opinion. This evaluation is probably not handled as buying and selling recommendation. RoboForex bears no duty for buying and selling outcomes primarily based on buying and selling suggestions and critiques contained herein.