EUR/USD: ECB Cut & Rally – Analysis
- The euro is showing strength,gaining ground even after the European Central Bank (ECB) lowered its deposit rate by 25 basis points to 2%.
- The EUR/USD rally accelerated following ECB President Christine Lagarde's remarks that the central bank is "well-positioned." However, Lagarde also noted that achieving the 2% inflation target is not...
- Lagarde highlighted the uncertainty surrounding global tariffs as a significant challenge.
Following the ECB’s rate cut, the EUR/USD surged, defying expectations. This powerful move, detailed in this analysis, was driven by President Lagarde’s comments, sending the euro higher, despite the central bank reducing the deposit rate to 2%.We break down why the primary_keyword, EUR/USD, is currently strong, while also examining the implications of the ECB’s inflation target of 2% by 2027, which suggests possible further policy adjustments. Our technical analysis highlights potential resistance levels at 1.1520 and 1.1550-1.1573. Gain insights utilizing the latest market data; News Directory 3 provides updates. Discover what’s next for this currency pair, and the factors influencing its future direction.
EUR/USD Rallies Despite ECB Rate Cut Amid Inflation Concerns
Updated June 05,2025
The euro is showing strength,gaining ground even after the European Central Bank (ECB) lowered its deposit rate by 25 basis points to 2%. The markets had largely anticipated the rate cut, leading to initial price fluctuations that quickly stabilized.
The EUR/USD rally accelerated following ECB President Christine Lagarde‘s remarks that the central bank is “well-positioned.” However, Lagarde also noted that achieving the 2% inflation target is not expected until 2027, suggesting further policy adjustments may be necessary.A strong euro could negatively impact exports, especially given the current economic slowdown, she added.
Lagarde highlighted the uncertainty surrounding global tariffs as a significant challenge. Any positive developments in trade negotiations are generally welcomed by the markets.
From a technical analysis standpoint, the euro has maintained its upward trajectory since mid-May. The daily exponential moving averages (EMA) 20 and EMA 50 are providing support. Momentum remains strong, with the Relative Strength Index (RSI) not yet indicating overbought conditions on the daily chart. The current daily candle is robust, overlapping the June 3 bearish candle.
On the 4-hour chart, the EUR/USD bounced off the immediate pivot at 1.1335, fueled by a weaker U.S. dollar. The bullish momentum is confirmed by a strong candle, pushing the currency pair toward the 1.15 key level and breaking through the downward trendline from the June 3 highs. The next target is the yearly high at 1.15730, even though the 4-hour RSI is currently overbought.
Analyzing the 1-hour chart, the ECB conference concluded with a strong candle, rapidly approaching the 1.15 level. The 50-period moving average acted as support, and the RSI is well into overbought territory. Key hurdles before reaching the April 2025 highs include the last support level before the end-April downtrend at 1.1520 and the main resistance zone between 1.1550 and 1.1573.
What’s next
Looking ahead,traders should monitor key levels and global trade developments for further clues about the EUR/USD’s trajectory. The ECB’s September projections will be crucial in determining future monetary policy decisions.