Euro Strengthens to One-Month High Ahead of Key ECB Decision

 Key Takeaways:

*The euro gains to its one-month high against its peers on the back of solid economic indicators. 

*Today, the market will focus on the eurozone CPI to gauge the strength of the euro.

The euro has extended its gains against major currencies, climbing to its highest level in a month as markets position for critical eurozone economic data and the upcoming European Central Bank (ECB) policy meeting. The single currency has traded with relative stability following the U.S.-EU agreement to suspend tariffs, removing a key overhang that had previously weighed on sentiment.

Supporting the euro’s advance, recent economic indicators have painted an encouraging picture of the region’s recovery. Inflationary pressures have stabilized near the ECB’s target, while growth metrics suggest the eurozone economy continues to show resilience. The constructive outlook was further bolstered by notable commentary from ECB officials, including suggestions to promote the euro as a more prominent global reserve currency alternative, citing its relative stability compared to the U.S. dollar.

Market attention now turns to today’s eurozone CPI release, with consensus expecting the inflation reading to hold near the 2% target. More significantly, Thursday’s ECB policy decision looms large, where analysts anticipate a potential modest rate adjustment. While most expect the central bank to maintain its accommodative stance, any signals about the timing of policy normalization could provide fresh directional impetus for the euro.

The currency’s ability to sustain its recent gains may hinge on these upcoming catalysts. A confirmation of stable inflation coupled with a dovish-hold from the ECB could see the euro consolidate near current levels, while surprises in either release could spark renewed volatility. Traders will be particularly attentive to any changes in the ECB’s forward guidance regarding the path of monetary policy amid the evolving economic backdrop.

Technical Analysis

EURUSD, H4 

The EUR/USD pair has completed a notable bullish reversal, recovering all prior losses and extending gains to reach a fresh one-month high. This price action signals a potential shift in market sentiment, with the pair now approaching a key technical resistance level at 1.1470, where some consolidation or retracement may emerge as traders assess the sustainability of the breakout.

From a technical perspective, momentum indicators confirm the strengthening bullish bias. The Relative Strength Index (RSI) has decisively crossed above the 50 midline, reflecting growing buying pressure, while the Moving Average Convergence Divergence (MACD) has rebounded above the zero line, suggesting that bullish momentum is now firmly in control.

The pair’s ability to sustain above 1.1470 will be critical in determining whether this upward move represents a short-term correction or the beginning of a more sustained bullish phase. A clean break above this resistance could open the door for further gains toward 1.1520-1.1550, while failure to hold current levels might see the pair retest support near 1.1420-1.1400.

Resistance Levels: 1.1470, 1.1625

Support Levels: 1.1340, 1.1200