On Thursday (September 11th), the EUR/USD pair traded sideways around 1.1690 during the European session, remaining near its relative high since late July. The European Central Bank will announce its interest rate decision at 8:15 PM today, followed by a press conference by ECB President Christine Lagarde, who will also release updated macroeconomic forecasts. As the decision approaches, volatility in the foreign exchange and equity markets has picked up, with traders focused on the details of the wording, including whether it will mark the end of the rate-cutting cycle.

Fundamentals

After suspending interest rate cuts in July, Europe and the United States finalized a new trade arrangement, which set a unified tariff of 15% on goods exported from the EU to the United States; combined with the eurozone's GDP growth of 0.1% month-on-month in the second quarter (previous value 0.6%), and the HICP growth of 2.1% year-on-year in August (2.0% in July), which was higher than expected, the market generally expected that the main interest rate would be kept unchanged this time.
More crucial is forward guidance: BBH reports that swap markets are pricing in a roughly 75% probability of a 25 basis point rate cut over the next 12 months, but a Reuters poll shows that most economists believe the rate-cutting cycle is likely over. Analysts predict the conference will focus on "economic resilience and reduced external uncertainty." When pressed on the risks, Lagarde is likely to emphasize that the Governing Council is "well-positioned" but will not explicitly hint at the path of subsequent rate cuts. Meanwhile, the French parliament voted this week to remove Prime Minister François Baillou and his minority government, generating political noise but with limited direct impact on the central bank's decision-making and forecasts.

This update will also include an update to the staff macroeconomic outlook, focusing on the output gap, potential growth, and inflation. If potential growth is revised downward while inflation remains above target, the neutral interest rate will be forced to rise, raising the bar for rate cuts. Conversely, if both output and inflation are revised downward simultaneously, the need for renewed easing increases. In contrast, the Federal Reserve emphasizes "data dependence" and has not committed to rapid easing. The divergent communication strategies of the two central banks continue to drive relative policy expectations in the exchange rate.

Technical aspects:

On the 240-minute candlestick chart, the middle Bollinger Band is at 1.1719, the upper Bollinger Band is at 1.1774, and the lower Bollinger Band is at 1.1663. The current price is around 1.1690, below the middle Bollinger Band and close to the previous oscillation center. The candlestick structure shows that recent candlesticks have small bodies and coexisting upper and lower shadows, indicating a clear oscillation pattern. The middle Bollinger Band at 1.1719 has been repeatedly tested by the upper shadow without being able to recover, indicating dynamic pressure.



The DIFF of MACD is -0.0001, the DEA is 0.0005, and the MACD-Histogram is -0.0013. The momentum is slightly bearish but not extreme. The RSI (14) is 44.5313, which is below the boom-bust boundary of 50, indicating that the bullish momentum has not yet fully recovered. If the price continues to be under pressure in the 1.1719 area (the middle Bollinger band), the first resistance above will be 1.1774, and it will form a heavy resistance area with the swing high of 1.1779. The support below will be 1.1663 and 1.1640, and below them are the two previous lows of 1.1607 and 1.1573. The width of the Bollinger Bands has been enlarged compared to the previous period. If the lower band continues to rise and the price holds 1.1663, it is expected to interpret the structure of "retracement-retracement-upward again"; on the contrary, if it repeatedly falls below 1.1690 and falls below 1.1640, the selling pressure may increase, and the short-term trend will turn into the risk zone of the descending channel.

Market Sentiment Observation

Futures and swap pricing are forming a market consensus around the ECB remaining on hold but no longer in a rush to cut interest rates. Meanwhile, market expectations for the Fed's marginal easing remain subject to further economic data confirmation. This potential for policy divergence is supporting bullish sentiment for the euro. The exchange rate is near its highest level since late July, accumulating concerns about missing out on opportunities. However, the divergence between the RSI and MACD suggests bullish sentiment is not overheating, and the price-volume relationship is more closely aligned with a "shrinking rise with stagnant momentum."

The risk lies in a lack of clear forward-looking language at the press conference, or if staff members unexpectedly lower their forecasts for this year's growth and inflation, sentiment could quickly shift to risk aversion and profit-taking. Observing trading microstructure, the European session tends to be dominated by passive quotes, while active orders during the New York session are more likely to drive market direction. Breakouts are best triggered during periods of active trading to reduce the probability of false breakouts. Overall, the market remains in a consolidating state, with news events needed to trigger a move in direction.

Market Outlook

Short-term (event window): If a statement or press conference explicitly states "currently a good position to wait and see" and hints at a higher threshold for rate cuts, coupled with upward revisions to 2025 inflation and growth forecasts, this would be a hawkish stance. In this scenario, if the exchange rate breaks through 1.1719 and closes above 1.1750, it could challenge the 1.1774/1.1779 resistance band, potentially reaching 1.18. Conversely, if the forecast is revised downward, or the statement reverts to "remaining open to further rate cuts" with no threshold constraints, the market will price in a dovish reading, potentially testing 1.1663. A break below this would target 1.1640, with potential extensions to 1.1607 and 1.1573.