On Thursday (April 17th) during the European session, the EUR/USD exchange rate consolidated below the level of 1.1400, as the market awaited the European Central Bank's (ECB) monetary policy statement. The exchange rate recorded its highest daily closing price since 2022 yesterday, but saw a slight correction after opening today. Although the market generally expects the European Central Bank to cut interest rates by 25 basis points, the exchange rate performance remains resilient.

Fundamental analysis

The weakening of the US dollar has become the main factor supporting the rise of the euro. There are reports that US President Trump plans to use ongoing tariff negotiations to pressure US trading partners, which has raised concerns in the market about escalating trade conflicts.

The market widely expects the European Central Bank to lower key interest rates by 25 basis points after its April policy meeting. As the European Central Bank will not release a revised economic forecast this time, the market will closely monitor the wording of the statement and the remarks made by European Central Bank President Lagarde at the post meeting press conference.

Earlier this week, it was reported that after almost no progress was made in Monday's negotiations, the EU expects most of the tariffs implemented by the United States to remain unchanged. If the European Central Bank emphasizes more on the upward risk of tariffs on inflation rather than concerns about economic growth prospects, the market may interpret it as a hawkish tone. In this situation, the euro may remain strong.

On the contrary, if the European Central Bank or President Lagarde reaffirms their confidence in the current inflation cooling process and implies that they will continue to relax policies, the euro may find it difficult to gain support. Deutsche Bank believes that given some factors supporting further interest rate cuts by the European Central Bank, the risk seems to lean towards a weaker euro.

Technical analyst interpretation:

The exchange rate has formed a series of high and low points on the 60 minute chart, with the highest point at 1.1472 and the lowest point at 1.1246. At present, the exchange rate is trading around 1.1380 and around MA14, indicating a short-term upward trend. The MACD indicator shows an emerging divergence, with a DIFF value of 0.0004, DEA value of 0.0007, and MACD value of -0.0006, indicating that momentum may be weakening. The RSI index reading is 55.1631, which is in the neutral zone and does not show overbought or oversold status.

From the daily chart, the euro against the US dollar has formed a stable upward trend since the low of 1.0177, recently breaking through the key resistance level of 1.1280 and reaching a high of 1.1472. The MA55, MA14, and MA200 moving averages show a clear bullish trend, confirming a strong upward trend. The daily RSI reading is 71.7810, entering the overbought area, indicating that there may be downward pressure in the short term. The MACD indicator shows a DIFF value of 0.0166, DEA value of 0.0127, and MACD value of 0.0079, confirming strong upward momentum. The CCI indicator reading is 100.3758, also entering the overbought area, further supporting the potential technical pullback viewpoint.

Market sentiment observation

The market sentiment is currently leaning towards optimism. After touching the psychological level of 1.1400, the euro experienced a certain degree of profit taking, but overall it remained strong. The overbought reading of the Relative Strength Index (RSI) on the daily chart warns that there may be a short-term adjustment, but the trend line support remains intact, indicating that bulls still dominate.

Meanwhile, market expectations for the European Central Bank's interest rate cuts have been largely digested, which means that unless the ECB sends a more dovish signal at the meeting, the downside space for the euro may be limited.

Future prospects

Short term outlook: EUR/USD may experience volatility following the decision of the European Central Bank. If the European Central Bank takes a more dovish stance than market expectations, the exchange rate may test support in the 1.1280-1.1300 region. On the other hand, if the European Central Bank expresses concerns about inflation risks, the exchange rate may retest the 1.1400 level or even challenge the recent high of 1.1472.

Medium - to long-term outlook: From a technical perspective, as long as the exchange rate remains above the upward trend line, the long-term outlook for the euro remains bullish. The bullish arrangement on the daily chart indicates that although there may be short-term adjustments, the upward trend remains intact. The key support is at 1.1280 and 1.1177 (200 day moving averages), while the key resistance is at 1.1472 and 1.1500 (psychological thresholds).

For the bearish scenario, traders are concerned about whether the exchange rate has fallen below the support of 1.1280, which may trigger a deeper adjustment to 1.1177. In addition, if the European Central Bank adopts a more dovish stance than expected and market concerns about US trade policies are eased, the euro may face greater downward pressure.