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The euro is treading carefully as traders await key economic data and an ECB policy update. This analysis breaks down the factors shaping sentiment and what to watch next.
Euro eases ahead of key eurozone data and ECB decision
The euro dipped slightly on Wednesday, pulling back from a two-and-a-half-week peak as investors adopted a cautious stance ahead of crucial eurozone economic releases and the upcoming European Central Bank (ECB) policy decision.
EUR/USD slipped 0.1% to $1.1756 after briefly reaching an overnight high of $1.1780, based on LSEG figures.
Market participants are preparing for a series of flash purchasing managers’ index (PMI) reports, with France kicking off at 0715 GMT, followed by Germany at 0730 and the broader euro area at 0800.
Attention will then shift to the ECB, which is set to announce its policy verdict at 1215 GMT.
While the central bank is widely anticipated to leave interest rates unchanged, traders will be closely monitoring its forward guidance – particularly any comments on the euro’s recent gains, which could affect export competitiveness and inflation outlooks.
Adding to the uncertainty, The Wall Street Journal reported ongoing discussions between the EU and US regarding a trade deal that includes a potential 15% tariff reduction.
This development has sparked concerns over renewed transatlantic trade tensions, which could put additional pressure on the single currency.
Technical analysis
EUR/USD maintained a steady climb from its recent low of 1.17037, reaching a session high of 1.17801 before encountering renewed selling interest. However, bullish momentum has started to fade.
Picture: Bullish steam runs out as EURUSD slips below 1.1770, as seen on the VT Markets app.
The MACD histogram is weakening, and a bearish crossover has formed – signalling potential short-term fatigue among buyers.
Additionally, both the 5- and 10-period moving averages are beginning to slope downward.
The pair is currently hovering just above key support at 1.17550. A decisive move below this level could pave the way for a retest of the previous low around 1.1700.
On the upside, buyers would need to reclaim the 1.1780 level with conviction to re-establish upward momentum.
Outlook remains cautious
The euro’s recent rally may struggle to extend further as markets weigh cautious signals from the ECB and uncertainties surrounding global trade relations.
Should the central bank express concern over the currency’s appreciation or remain non-committal about future rate moves, downside risks could come into play.
On the other hand, a hawkish tone from policymakers or stronger-than-expected PMI readings could inject fresh bullish momentum.
Until clearer direction emerges, EUR/USD is likely to consolidate in a tight range between 1.1720 and 1.1780.
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