EUR/USD: ECB Meeting and Interest Rate Expectations

On 11 June, the ECB is holding the second day of its Governing Council meeting. The interest rate decision will be announced at 14:15 CET, followed by a press conference by Christine Lagarde at 14:45 CET. Markets are focused on the possibility of a 25-basis-point rate increase to 2.25%.

The case for further tightening is supported by accelerating inflation in the euro area, driven in part by higher energy prices resulting from geopolitical tensions in the Middle East. At its 30 April meeting, the ECB paused its policy cycle but indicated that June would be an important point for reassessing the outlook. Labour market resilience and signs of second-round inflation effects have strengthened the arguments in favour of tighter policy. The tone of the press conference could shape market expectations for interest rates through the remainder of the year.

Technical Picture

Following a peak near 1.2000 in January, EUR/USD formed a downward move towards the March lows around 1.1400 on the daily chart. An ascending trendline drawn from the March lows is currently being tested from above, with price attempting to break below it.

At the same time, the pair is trading beneath the lower boundary of the current volume profile at 1.1620, which may indicate increasing selling pressure in this area. Should the price remain below the trendline, the next downside reference point could be the green support level around 1.1450.

The red resistance zone is located near 1.1850. If the market reverses higher and manages to overcome both the point of control (POC) at 1.1720 and the upper boundary of the profile at 1.1790, this area could become the next target for buyers.

RSI + MAs currently shows readings of 35, 41 and 44. All three lines remain below the neutral 50 level, while the moving averages continue to point lower.

Key Takeaways

The outcome of the ECB press conference on 11 June may determine whether the current attempt to break the corrective trend develops into a sustained move or ends with a return to the point of control (POC) area. For now, RSI + MAs remains firmly in bearish territory.

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