EUR/USD forecast: ECB decision and Eurogroup meeting preview

The EUR/USD pair held steady on Thursday morning as the focus shifted to the upcoming Eurogroup meeting and interest rate decision by the European Central Bank (ECB). It is trading at 1.1051, which is about 2.3% above the lowest level this year.

ECB decision and Eurogroup meeting

European leaders will hold an emergency meeting on Thursday to deliberate the ongoing crisis in Ukraine and the region’s energy policy. The leaders will discuss possible solutions to stop dependence on Russia’s oil and gas industry. 

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Most importantly, the leaders will deliberate on potential stimulus policy as fears rise that the region could be moving towards a recession as energy costs rise.

Meanwhile, the European Central Bank (ECB) will conclude its two-day meeting on Thursday. Analysts expect that the bank will sound a bit cautious because of the state of the economy.

Ideally, it would be a good time for the ECB to lift-off. Besides, the Eurozone inflation has jumped to a record high while the unemployment rate has dropped to the lowest level on record. 

The biggest challenge that the bank faces is that the ongoing crisis will hit the region’s growth as inflation surges and logistics challenges continue. Therefore, an aggressive policy of tightening will likely have an impact on the overall recovery process.

The other key mover of the EUR/USD pair will be the upcoming American consumer inflation data. Economists expect the data to show that the American inflation remained at elevated levels in February. 

Precisely, they expect that the headline consumer inflation rose to 7.9% in Febriary while core CPI fell slightly to 5.9%. Worse, the situation will worsen now that commodity prices have surged. For example, wheat and natural gas have risen to an all-time high. Therefore, the Fed will likely start hiking rates in the coming week.

EUR/USD forecast

The daily chart shows that the EURUSD pair has been in a strong bearish trend in the past few months. This culminated to the pair crashing to 2020 lows this week. It has bounced back and is slightly below the 23.6% Fibonacci retracement level. It still remains below the 25-day and 50-day moving averages.

Therefore, this recovery seems like a dead cat bounce, meaning that the pair will resume the downward trend after the ECB decision. If this happens, the next reference level will be at 1.0850.