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Today will be a busy day for EURUSD traders. First, SNB cut rates by 50 basis points, 25 more than expected. This move is likely to cause some stress for Euro bulls ahead of the ECB meeting. In addition to the ECB meeting, US PPI data and weekly jobless claims will be released before the US market opens.
The ECB is expected to cut rates by 25 basis points today, bringing the deposit rate down to 3%. According to a Bloomberg poll, economists anticipate rate cuts will continue until the deposit rate reaches 2%, which is widely considered neutral. However, the swap market is pricing in one more cut than the poll suggests. In any case, a 25-basis-point cut is almost a certainty today. Despite the negative sentiment created by the SNB’s action, a 50-basis-point cut is unlikely, as even the dovish members of the ECB are unlikely to support such a move, especially after the recent data on higher-than-expected negotiated wages for the third quarter.
Today, forecast updates are expected to carry more weight than the rate cut itself, unless the ECB surprises the market. Given weak growth and inflation data, the ECB will likely lower its forecasts for 2024 and 2025, with no significant changes expected for the longer term. The extent of the reductions and the tone of Lagarde’s speech will be the main focus of today’s ECB meeting.
(EURUSD 1H Chart)
©Bloomberg
The main long-term support for EURUSD is at 1.048 on the monthly chart, which is highlighted in our monthly report. In the shorter term, EURUSD’s trend remains flat, ranging between 1.046 and 1.06. This horizontal movement is further divided into two zones, with the 1.0530–1.0540 range acting as a key separator.
The upper zone lies between 1.0530–1.0540 and 1.06, while the lower zone is between 1.046 and 1.0530–1.0540. Currently, EURUSD is trading in the lower zone. This fractured flat movement is likely to persist unless EURUSD breaks and holds above 1.06 or below 1.046. A break below 1.046 could be particularly concerning due to the significance of the 1.048 support level on the monthly chart.
