EUR/USD outlook: EUR/USD awaits ECB's verdict

EUR/USD

EURUSD stays in a quiet mode early Thursday as traders reduced speed ahead of key event of the day – ECB policy decision.

The central bank is widely expected to cut rates by 25 basis points to 3.5%, after June’s 0.25% rate cut.

With today’s cut being almost certain, markets turn focus towards ECB’s next steps, looking for the dynamics of ECB’s action in the near future.

While some expect the central bank to deliver another 25 basis points cut in October, arguing that inflation continues to ease and is near 2% target and economic growth is anemic, with no significant changes in economic picture expected, others point to persisting inflation risk which requires cautious approach.

This fits within ECB’s mantra that any future decision will be based on incoming data and taken meeting by meeting.

Near-term price action is in a sideways mode for the second day and holding just above pivotal 1.10 support zone (psychological / Fibo 38.2% of 1.0666/1.1201).

Technical picture is weakening as the price broke below MA’s (10/20-d) and bearish momentum is strengthening, with long upper shadow on Wednesday’s candlestick pointing to strong supply.

Dovish comments from ECB policymakers would raise pressure on euro, with firm break of 1.10 to open way for deeper pullback towards 1.0947/33 (55DMA / 50% retracement), guarding the top of rising daily cloud (1.0893).

Conversely, the single currency may receive fresh boost from more hawkish ECB’s stance, with lift above daily Tenkan-sen (1.1078) to sideline immediate downside risk.

Res: 1.1051; 1.1078; 1.1091; 1.1119.
Sup: 1.1000; 1.0947; 1.0933; 1.0893.

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