EUR/CHF steady ahead of ECB policy decision, Euro buoyed by optimism around US-EU tariff deal

The Euro (EUR) reverses its intraday losses against the Swiss Franc (CHF) on Tuesday, with the EUR/CHF cross rebounding to trade around 0.9331 during the American trading hours. Earlier in the session, the pair dipped to an intraday low of 0.9293, but found firm support near the lower boundary of its multi-week consolidation range, as market participants turned cautious ahead of Thursday’s European Central Bank (ECB) monetary policy decision.

The Euro draws some support from optimism around a potential trade breakthrough between the United States and the European Union, as reported by the Financial Times. The report suggests both sides are nearing an agreement on a 15% baseline tariff structure, modeled after the recent US-Japan deal.

The mild intraday rebound in EUR/CHF also reflects growing uncertainty around the ECB’s next move, with traders dialing back expectations of aggressive rate cuts amid mixed signals from recent eurozone data. The ECB is widely expected to hold or pause its rate-cutting cycle at Thursday’s meeting, keeping the deposit rate steady at 2.00%. While inflation remains close to the ECB's 2% target, all eyes will be on President Christine Lagarde’s guidance, especially as inflation cools and economic sentiment improves across the Eurozone.

Meanwhile, the Swiss National Bank (SNB) has already slashed rates to zero and continues to strike a more dovish tone, with policymakers open to further easing should deflationary risks persist. This growing policy divergence has acted as a stabilizing force for EUR/CHF, preventing deeper declines and keeping the pair anchored within a narrow 0.9300-0.9430 range. However, a dovish surprise from the ECB or any fresh signals of intervention risk from the SNB could shake this fragile balance.

From a technical standpoint, the EUR/CHF cross remains stuck below the 20-day simple moving average (SMA), which also serves as the mid Bollinger Band and is currently positioned at 0.9331. This level continues to cap upside attempts, acting as a dynamic resistance within the broader consolidation.

The Bollinger Bands are narrowing, suggesting reduced volatility and a potential buildup for a breakout. However, until a decisive move outside the 0.9300-0.9430 range occurs, sideways action is likely to persist.

However, the Relative Strength Index (RSI) is gradually ticking higher, currently hovering near 47, still below the neutral 50 mark. This points to tentative but emerging buying interest, though momentum remains fragile as traders wait for a clearer directional signal. Meanwhile, the Average Directional Index (ADX) at 23.30 suggests that trend strength is gradually building, but remains below the key 25 threshold, indicating that directional conviction is still lacking.

A sustained break below the 0.9300 support level would mark a bearish shift, potentially exposing downside levels around 0.9250. On the flip side, a bounce from current levels and a close above the 20-day SMA could see the cross reattempt the upper range boundary near 0.9430, with the next resistance seen at the psychological 0.9500 level.