EUR/USD Price Forecast: Softens below 1.1750 amid ECB rate hold expectations

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The EUR/USD pair declines to around 1.1730 during the early European session on Wednesday, pressured by renewed US Dollar (USD) demand.

EUR/USD softens to around 1.1730 in Wednesday’s early European session.
The ECB is widely expected to leave interest rates unchanged on Thursday for a fourth consecutive meeting.
The major pair keeps the positive picture above the 100-day EMA and bullish RSI momentum despite a pullback.
The initial support level emerges at 1.1639; the first upside barrier to watch is 1.1788.

The EUR/USD pair declines to around 1.1730 during the early European session on Wednesday, pressured by renewed US Dollar (USD) demand. Nonetheless, the potential downside for the major pair might be limited amid the growing acceptance that the European Central Bank (ECB) is done cutting interest rates. The ECB is expected to hold interest rates steady at its December meeting on Thursday. The central bank has kept its key deposit rate on hold at 2% since July.

Across the pond, the mixed US employment report for November showed that the US labor market remains relatively resilient but shows signs of slowing. This, in turn, could drag the Greenback lower and create a tailwind for the major pair. The US Nonfarm Payrolls (NFP) rose by 64,000 in November after falling by 105,000 in October. This figure came in better than the estimates of 50,000. Meanwhile, the Unemployment Rate in the US ticked higher to 4.6% in November from 4.4% in October.

Technical Analysis:

In the daily chart, EUR/USD trades at 1.1732. The 100-EMA nudges higher at 1.1611, with price holding above it and sustaining an upward bias. The 20-period average inside the Bollinger bands advances near 1.1639, supporting shallow pullbacks. Price leans toward the upper band, and the bands are widening, indicating firm bullish pressure alongside rising volatility.

RSI at 65.58 shows solid bullish momentum while not yet overbought. Immediate resistance stands at the upper Bollinger Band at 1.1788, whereas support is set at the middle band at 1.1639 and the 100-EMA at 1.1611. A break higher could open the door to an extension of the advance, while failure to clear resistance would keep the pair capped and invite a retracement toward support.

(The technical analysis of this story was written with the help of an AI tool)

ECB FAQs

What is the ECB and how does it influence the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

What is Quantitative Easing (QE) and how does it affect the Euro?

In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.

What is Quantitative tightening (QT) and how does it affect the Euro?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.

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