Euro Steadies as ECB Holds, Fed Easing Bets Take Center Stage

Key Takeaways:

*ECB held rates at 2.0% as expected, signaling its easing cycle may be on pause.

*Growth outlook upgraded (2025 GDP forecast raised to 1.2% from 0.9%) to resilience in domestic demand.

*Fed easing expectations rising after U.S. jobless claims spiked to 263K, creating policy divergence supportive of the euro.

Market Summary:

The Euro held steady this week as the European Central Bank (ECB) opted to keep its deposit rate unchanged at 2.0%, signaling a cautious but stable policy stance. President Christine Lagarde’s declaration that the “disinflationary process is over” and upgraded GDP projections for 2025 underscored a more balanced economic outlook. Growth is now expected at 1.2%, up from 0.9%, with domestic demand showing resilience despite lingering geopolitical and trade risks. Inflation is projected to dip toward 1.7% in 2026, broadly anchoring expectations around the ECB’s medium-term target.

Markets, however, are increasingly focused on the Federal Reserve. A sharp rise in U.S. jobless claims to 263,000 which is the highest level in years has cemented expectations of imminent Fed rate cuts, with traders assigning meaningful odds to a 50 basis point move. This divergence in policy trajectories, where the ECB signals a pause while the Fed turns dovish, provides near-term support for the single currency by limiting downside risks.

Political uncertainty within the Eurozone remains a headwind, particularly in France where elevated borrowing costs risk spilling over into broader sentiment. Still, barring a major escalation in trade tensions or renewed political instability, the euro is positioned to benefit from relative policy stability at the ECB and growing expectations of easing across the Atlantic. The currency’s next directional catalyst will hinge on incoming U.S. data and clarity around Fed policy timing.

Technical Analysis 

EURUSD, H4

EUR/USD continues to trade within a broad consolidation range, capped by resistance at 1.1785 and supported by 1.1690. Recent price action shows repeated failures to break either boundary, highlighting indecision and range-bound conditions. In the near term, the pair has bounced from the mid-range support at 1.1720, with buyers now eyeing another test of 1.1785. A breakout higher would shift focus toward 1.1900, while a rejection could drag the pair back toward 1.1690.

Momentum indicators lean constructive but non-committal. RSI is hovering near 56, reflecting mild bullish pressure without signs of overextension. The MACD is flat around the zero line, suggesting momentum lacks conviction and confirming the sideways structure.

Overall, EUR/USD remains locked in consolidation. A sustained close above 1.1785 would be the catalyst for bullish continuation, whereas failure to break this barrier risks another swing lower toward 1.1720 and 1.1690.

Resistance levels: 1.1785, 1.1900
Support levels: 1.1690, 1.1585