EUR/USD Analysis: ECB Cuts Interest Rate for First Time Since 2019

FXOpen

By its decision, the ECB followed the example of the Bank of Canada, which lowered interest rates by 0.25%, as we reported yesterday. Consequently, this trend might continue with the Federal Reserve, marking the development of easing monetary policy cycles in Western economies.

According to ForexFactory:
→ the interest rate had been at 4.50% since September 2023;
→ it was reduced to 4.25%;
→ the reduction was accurately predicted by experts.

According to CNBC:
→ the ECB forecasts inflation at 2.5% in 2024 and 2.2% in 2025;
→"Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady," stated the ECB Governing Council.

Given that the rate cut was anticipated, the EUR/USD rate hasn't changed significantly today, despite a noticeable spike in volatility.

Analysing the EUR/USD chart on 30 May, we highlighted the importance of the 1.08 level.

Since then, the bulls have shown the ability to bounce off this level and rise to 1.09.

The technical analysis of the EUR/USD chart, considering fresh data, provides important insights:
→ the 1.09 level shows signs of resistance, as the price struggles to stay above it for long;
→ this is evident from the price action forming peak B, as well as from yesterday’s action following the ECB news release;
→ the RSI indicator is forming a bearish divergence between peaks A and B.

Thus, the EUR/USD price is forming a narrowing triangle between the ascending trendline (shown in green) and the 1.09 level. It’s possible that a breakout of this pattern, which can be interpreted as a temporary consolidation, will lead to a new significant trend. The impetus for this could be the results of the European Parliament elections taking place from 6-9 June.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips. Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Forex Analysis

USD/JPY Analysis: Rate Rises Above 159.9 Yen per Dollar SNB Unexpectedly Lowers Interest Rate from 1.50% to 1.25% GBP Awaits Bank of England Verdict: Volatility Ahead? Market Analysis: AUD/USD and NZD/USD Sight Steady Increase European Currencies Adjust to Support Levels: Is Growth Possible?

Latest articles

Forex Analysis

USD/JPY Analysis: Rate Rises Above 159.9 Yen per Dollar

The yen was last this weak against the US dollar in late April, leading to currency interventions as the Bank of Japan deemed a rate above the psychological mark of 160 yen per USD unacceptable.

The current weakness of the

Indices

S&P 500 Falls from Record High in Anticipation of Key News

On Friday, at 15:30 GMT+3, the Core PCE Price Index values will be released – an economic indicator to which the Federal Reserve pays special attention when assessing inflation levels in the US. This event is likely to cause

Weekly Market Wrap With Gary Thomson: Nasdaq 100 Index, GBP, SNB Interest rate, Brent Crude Oil
Financial Market News

Weekly Market Wrap With Gary Thomson: Nasdaq 100 Index, GBP, SNB Interest rate, Brent Crude Oil

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of FXOpen UK, as he breaks down the most significant news reports and shares his expert insights.

  • Nasdaq 100 Index Reaches
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.