Home EUR/USD Price Analysis: ECB Set to Deliver Bigger Hike than Fed

EUR/USD Price Analysis: ECB Set to Deliver Bigger Hike than Fed

  • The euro is expected to increase by 0.4% this week.
  • Investors are expecting a 25bps rate hike from the Fed.
  • Markets are expecting a 50bps rate hike from the ECB.

Today’s EUR/USD price analysis is slightly bullish. The dollar dropped almost to a nine-month low versus the Euro in response to market predictions that the European Central Bank will impose a rate hike next week that is twice as large as the Federal Reserve. The euro is expected to increase by 0.4% this week, marking its third consecutive week of gains.

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The Fed hiked rates by 50 bps in December, so traders mostly anticipate a 25 bps hike on Wednesday. The European Central Bank, on the other hand, is now almost certain to raise its benchmark interest rate by 0.5 percentage points on Thursday.

According to data, the US economy continued to grow rapidly in the fourth quarter, supporting the argument for the US Federal Reserve to keep its hawkish position for longer. As a result, the dollar moved up against the euro on Thursday.

According to the Commerce Department’s preliminary estimate of fourth-quarter GDP growth, the gross domestic product grew at an annualized rate of 2.9%.

According to a separate Labor Department report, initial claims for state unemployment benefits decreased by 6,000 to a seasonally adjusted 186,000 for the week ending January 21.

EUR/USD key events today

Investors expect the Core Personal Consumption Expenditure (PCE) Price Index from the US. It tracks changes in the cost of consumer goods and services, excluding food and energy, purchased for consumption. There will also be a pending home sales report that will show the state of the US housing market.

EUR/USD technical price analysis: On the verge of a bearish reversal

EUR/USD price analysis
EUR/USD price analysis

The 4-hour chart shows EUR/USD crossing below the 30-SMA after stopping at the 1.0924 resistance level. The RSI has also crossed below the 50-mark, showing a shift in sentiment from bullish to bearish.

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This comes after the RSI made a bearish divergence with the price at the 1.0924 resistance level, a sign of weakness in the bullish move. At the same time, bears showed their strength when they started making big-bodied candles at the 1.0924 resistance level. If bears succeed in taking over, we might see the price retesting the 1.0750 support level.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.