The EUR/USD currency pair is trading positively, hovering around the 1.0560 level during the early session in Europe on Tuesday. Despite this slight gain, the potential for a significant upward movement appears constrained due to increasing speculation regarding further interest rate cuts by the European Central Bank (ECB) later this week.
Market expectations are set for a 25-basis point rate reduction when the ECB convenes for its monetary policy meeting on Thursday. There remains a possibility, albeit lesser, for a more substantial cut of 50 basis points, which could influence market behavior. Investors have been particularly keen on the remarks from ECB President Christine Lagarde during her press conference after the meeting, anticipating insights regarding not only the impending rate cut but also the bank’s future policy path.
From a technical standpoint, the EUR/USD pair exhibits a bearish outlook. The major currency pair is struggling to surpass the significant resistance posed by the 100-day Exponential Moving Average (EMA). Contributing to this bearish sentiment is the 14-day Relative Strength Index (RSI), which is positioned below the neutral midline around 45.20. This suggests that there may be limited upward momentum in the short term.
On the downside, key support is identified at 1.0480, which marks the low reached on December 3. If the pair experiences a drop below this level, it could lead to further declines towards the lower boundary of the Bollinger Band at 1.0445. If selling pressures persist, the next significant support level is seen at 1.0332, which corresponds to the low recorded on November 22.
Conversely, should the currency pair manage to gain traction, the initial resistance to monitor is the upper boundary of the Bollinger Band situated at 1.0623. A sustained upward momentum could propel the pair toward the 100-day EMA at 1.0787, with the psychological level of 1.0800 serving as a further point of resistance.
