The European Central Bank is set to makes its latest interest rate decision in trading on Thursday and the overwhelming consensus is for the ECB to raise the deposit rate by 25 basis points from 2.25% to 2.50%. The move is primarily an attempt to insure against the renewed inflation shock coming from energy prices. Eurozone headline inflation accelerated to around 3.3% in August, moving further above the ECB’s 2% target, with the rise largely driven by energy prices that have risen again in line with major hostilities in the Middle East that have seen Brent Oil rise to nearly $100 a barrel.
The market is expecting this rise to represent a peak in rates for 2026, and this is where the potential for moves in the currency comes into the equation. If the ECB indicate that there is the possibility of more rate hikes in the coming month, most probably due to further increases in Oil and other energy products, then we could see the EURUSD push higher, however if they indicate that this will most probably be the last move in this cycle then traders are expecting the currency to fall.
The EURUSD is currently sitting in the middle of relatively tight recent ranges and therefore looks good for a possible break either side if we see anything outside market expectations. A hawkish hike should see topside resistance break and the market break into fresh ranges, while a more dovish outlook should challenge recent lows. No move at all would almost certainly see a big break to the downside.
Resistance 2: 1.1710 – August High
Resistance 1: 1.1677 – Trendline Resistance
Support 1: 1.1607 – Trendline Support
Support 2: 1.1565 – September Low
