Thursday’s EUR/USD outlook leaned modestly bullish, with the pair showcasing strength ahead of a pivotal European Central Bank policy meeting. Additionally, there was anticipation for the US GDP report, which might give clues on the potential direction of US interest rates.

The ECB will likely maintain steady rates. However, investors will pay attention to the strength of officials’ resistance against expectations of rate cuts. Market participants expect 130 basis points of cuts from the ECB throughout the year. The ECB concluded its fastest rate-hiking cycle in September. However, policymakers have said that discussions about rate cuts are premature.

Meanwhile, markets expect the Fed to maintain its current stance in the US next week. However, the focus will be on Chair Jerome Powell’s comments. Markets currently indicate a 43% probability of a cut in March, a notable decrease from 88% a month ago. At the same time, traders are pricing in 134 basis points of cuts this year, down from 160 bps at the close of 2023.

The dollar has risen approximately 2% this month as traders significantly reduce expectations for early and substantial rate cuts from the Fed. This shift follows hawkish remarks from policymakers. Moreover, recent data has highlighted the resilience of the US economy.

Notably, data on Wednesday revealed an uptick in business activity in the US, accompanied by a decrease in a measure of inflation. Prices companies charge for their products fell to the lowest level in over 3 1/2 years.

EUR/USD key events today

• ECB monetary policy meeting
• US Gross Domestic Product
• US initial jobless claims

EUR/USD technical outlook: Sideways near 1.0900

(Click on image to enlarge)

EUR/USD 4-hour chart

The pair is moving sideways on the charts, caught near the 1.0900 key level. The price is chopping through the 30-SMA, showing a ranging market. However, the larger scale shows that the trend is bearish as the price makes lower lows and highs. Moreover, the price is making consistent impulse and corrective moves.

At the moment, EUR/USD is in a corrective move. Given the bearish bias on the larger scale, the next move could be a bearish impulsive leg. Consequently, the price might soon drop to the 1.0800 support.

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