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Bears Dominating Ahead of ECB Lagarde’s Speech

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  • Bets on ECB rate hikes have gone down significantly.
  • Investors expect Lagarde to give policy insights later today.
  • The price has broken out of the ascending triangle in the charts.

Today’s EUR/USD forecast is bearish as investors react to ECB President Largarde’s speech yesterday that failed to give any insight into the bank’s policy outlook. Lagarde said the bank would raise rates gradually with the option to act decisively on any reduction in medium-term inflation.

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“The ECB is in a tough spot because it is expected to see more significant slowing than many of its peers,” said Mazen Issa, senior FX strategist at TD Securities in New York. “There’s an inherent limit to how much the ECB will be able to do, particularly in the relative sense to, say, the Fed.”

Markets had expected 280-bps of cumulative rate hikes by mid-2023, but this value has gone down to 238bps.

“If there was an overall theme, it’s still that the dollar is stronger during this period of uncertainty. I expect the uncertainty to continue for at least the summer until we get a better idea of what inflation looks like,” said Marvin Loh, senior global macro strategist at State Street.

EUR/USD key events today

EUR/USD investors expect speeches from three ECB officials, including president Lagarde, who yesterday failed to give any insight on the bank’s policy outlook. Investors expect inflation data from Germany to drop from 0.9% to 0.3%.

In the United States, investors will be paying attention to the GDP report that will show how the economy performed in Q1. Finally, Fed Chair Powell will be speaking later today.

EUR/USD technical forecast: Looking to test 1.0452

EUR/USD forecast

Looking at the 4-hour chart, we see the price has broken out of the ascending triangle and is pushing lower. The price is trading below the 30-SMA, and the RSI is trading below 50, showing that bears have a good market grip.

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If bears can maintain this momentum, we could see the price getting to 1.04527 and later to 1.03620, at which point it might experience support. The current trend will only change if the price can push above the 30-SMA and the RSI trades above the 50 level. Till then, the bias remains bearish.

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