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EUR/USD rises to a 4-month high ahead of the ECB rate decision

• ECB is expected to cut by 25 bps
• Trade wars & fiscal changes could prompt caution over the next move
• EUR/USD rises to 1.08, a 4-month high

EUR/USD has reached a four-month high ahead of the ECB interest rate decision at 13:15 GMT.

The ECB is expected to cut rates by 25 basis points, the last easy decision for policymakers before attention turns to what comes next.

With simmering trade tensions and a massive fiscal U-turn in Germany enabling horizon defence and infrastructure spending, the outlook is less clear.

The central bank has cut rates five times since June as inflation has eased to 2.4% and economic growth falters. These are reasons for the ECB to continue cutting rates.

However, the prospect of a trade war with the US looms, as do changes to fiscal rules allowing increased spending, which could raise inflationary pressures. Some policymakers who are already making the case for pause have more reason to do so.

U.S. dollars have fallen to a four-month low amid rising concerns that Trump's trade tariffs could tip the US economy into recession. The fares come after a slate of weaker-than-expected U.S. economic data.

Yesterday, the US ISM PMI was stronger than expected, sharing your rising prices paid. However, ADP payrolls were considerably weaker than forecast, at 77K, down from 183K. Today, attention will be on US jobless claims, which are expected to ease modestly to 235K from 242K. The data comes ahead of tomorrow's key non-farm payroll. Any signs of weakness could fuel US slowdown worries.
 

EUR/USD forecast – technical analysis

EUR/USD broke out above 1.05 after multiple attempts, rising above several resistance levels, including the 200 SMA, to 1.08. The RSI is overbought, so buyers should be cautious about chasing the price higher. A pullback could be on the cards.

Support is seen at the 200 SMA at 1.0730. Below 1.06 comes into focus ahead of 1.05.

On the upside, buyers will look towards 1.0930, the November 2024 high, ahead of 1.10.

Oil rises from a multi-year low, but the outlook remains weak

• Trump trade tariffs raise concerns over oil demand outlook
• OPEC+ is set to increase output
• Oil recovers from 65.20, a multi-year low

Oil prices are rising on Thursday after days of heavy selling pressures pushed the market to multi -ear lows although the recovery remains fragile.

WTI has fallen 6.5% over the past four days, reaching its lowest level since May 2023. While bears are pausing for breath, the outlook remains skewed to the downside.

Oil prices have fallen on news that OPEC+ will press ahead with output increases in April. This surprised the market, which was expecting the production increase to be postponed again.

Meanwhile, the demand outlook remains weak after Trump applied 25% trade tariffs to Mexico and Canada and 10% to China. Worries over a recession in the US are rising after a slate of weak data.

Oil's selloff eased today as Trump delayed automaker tariffs for a month and could eliminate the 10% tariff on Canadian energy. Even so, Trump’s tariffs threaten to reduce global demand, which, combined with the prospect of further OPEC production increases, could keep prices under pressure.
 

Oil forecast - technical analysis

Oil prices have trended lower from the 80.00 peak in mid-January, forming a series of lower lows before hitting a low of 65.20. The price has recovered to above 66.50. The RSI supports further downside while it remains out of oversold territory.

Sellers will look to take out the 66.50 support to retest 65.20. Below here 63.75, the 2023 low comes into play.

Meanwhile, buyers may be encouraged by the long lower wick on yesterday’s candle, suggesting little selling pressure at the lower levels. Buyers would need to rise above 68.50 to return to a more neutral position. A rise above 70.50 creates a higher high.

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