EUR/USD price struggles below 1.0600 resistance amid ECB rate cut
Euro slides to three-day low near 1.0525 against dollar as resistance at 1.0600 holds
EUR/USD continues to face strong resistance around the 1.0600 level, which has acted as a barrier to further gains since November.
Despite a brief rally on Monday, the pair quickly reversed, and in today’s European session, it extended its losses to a three-day low near 1.0525. This price action has left EUR/USD in a bearish move within its broader bullish channel, raising questions about the near-term direction of the currency pair.
As the pair moves lower, technical indicators like the Relative Strength Index (RSI) have dropped below the neutral 50 mark, indicating weakening bullish momentum and suggesting that further downside pressure could be on the cards.
EUR/USD price dynamics (November-December 2024). Source: TradingView
EUR/USD price outlook: ECB decision to determine near-term direction
The European Central Bank’s (ECB) upcoming monetary policy decision on Thursday is a crucial event for the EUR/USD pair. Investors are expecting a 25-basis point reduction in the Deposit Facility Rate to 3%, which would mark the third consecutive interest rate cut by the ECB. This expectation is largely driven by a combination of factors, including slowing economic activity in the Eurozone, political instability in France and Germany, and uncertainty surrounding U.S. tariffs under President Trump which is keeping pressure on the euro.
A handful of ECB policymakers are even predicting that President Trump’s tariffs could weaken the euro further, potentially increasing import costs and fuelling price pressures in the region. However, some members argue that the impact of higher tariffs could hurt the Eurozone’s export sector and dampen inflationary pressures.
Technically, EUR/USD now faces near-term support around the psychological 1.0500 level. If this support holds, the pair could consolidate in a range, but any break below this mark would open the door for a deeper correction. This outlook depends heavily on the ECB's decision and its broader economic impact on the Eurozone, as well as any developments related to U.S. trade policies.
EUR/USD price hit a three-week high last week above the significant 1.0600 level. This short-lived rally was fueled by positive employment figures and GDP growth in the EU.
