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As the EUR/USD exchange rate continues to rise in recent sessions, traders are now turning their attention to Thursday’s European Central Bank meeting. The euro was supported by changing expectations on both sides of the Atlantic following last week’s easing of interest rate cuts by the Federal Reserve. Let’s see how the scene is formed.
changes in economic context
The Federal Reserve’s decision to cut interest rates to the lowest level in three years put additional pressure on the dollar. While the quarterly rate cut was expected, the divergence in opinions and new expectations underscores the central bank’s response to a weakening labor market and slowing inflation. This was interpreted as a sign that the Fed may take cautious action to widen the gap between its policies and those of the European Central Bank in the short term.
In Europe, Christine Lagarde hinted that the European Central Bank may raise its growth forecast, reinforcing the impression that the region’s economy is performing better than expected. This prompted traders to reprice next year’s monetary policy approach, leaving the market with the possibility of a rate hike before the end of 2026. Even if that doesn’t materialize, the change in tone compared to the Fed’s more dovish stance has supported the euro.
The EUR/USD currency pair is building an upward structure
Technically, the pair is forming a clear bullish structure on the daily chart. The November highs and lows showed a trend shift, which then developed into a clear uptrend, with prices reclaiming the 50-day moving average and heading towards the upper limit of the August-September consolidation range. That cap is now an important test in determining whether the recovery is sustainable.
Daily chart of the EUR/USD currency pair
Past performance is not a reliable indicator of future results
On the hourly time frame, we note that the advance has stalled within a tight range. This kind of consolidation after a strong rally usually indicates the potential for a catalyst-driven breakout. Prices holding near the top of the move point to strong buyers, but the lack of additional momentum suggests traders are awaiting Thursday’s decision.
EUR/USD hourly chart
Past performance is not a reliable indicator of future results
The main area of ​​short-term support is last week’s breakout level, which was the decisive point for the euro to see a swing ahead of the ECB decision. Holding above this level could lead to a bullish breakout, while a dip below this level could make the recent advance look like a test of resistance. Currently, the pair is trading within a narrow range, awaiting a decision on monetary policy.
Disclaimer: This article is for educational purposes only. The information provided does not constitute investment advice and does not take into account any investor’s personal financial situation or objectives. Any information that may be provided regarding past performance is not a reliable indicator of future results or performance.
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