With the ECB holding charges regular and President Lagarde emphasizing that the economic system is in a “good place,” markets navigated the fragile stability between optimistic financial assessments and lingering issues over EU-US commerce negotiations.
Let’s look at which pairs from our watchlist made sense to maneuver ahead on, and the way they carried out on this surroundings of average conviction and combined basic drivers.
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The Setup
- What We Had been Watching: ECB Financial Coverage Assertion for July 2025
- The Expectation: ECB to keep up major refinancing price at 2.15%
- Information consequence: Charges held regular as anticipated, with Lagarde hanging a much less dovish tone than anticipated
- Market surroundings surrounding the occasion: Impartial to constructive danger sentiment; easing commerce deal issues, and cautious risk-taking because the U.S. prints constructive employment information
Occasion End result
The ECB delivered precisely what markets anticipated when it comes to coverage motion – no change to rates of interest. Nevertheless, the true story unfolded throughout President Lagarde’s press convention, the place she struck a notably optimistic tone concerning the eurozone economic system.
Key factors from the ECB choice:
- All three key rates of interest remained unchanged, marking a pause after seven consecutive 25bp cuts
- Inflation at the moment sits on the ECB’s 2% medium-term goal
- Home worth pressures proceed to ease, with wages rising extra slowly
- Lagarde emphasised the financial institution stays “data-dependent” and follows a meeting-by-meeting method
- The ECB President downplayed issues about potential inflation undershooting, stating that “a minor inflation undershooting didn’t pose an issue because it was the medium-term outlook that mattered.“
Basic Bias Triggered: Much less Dovish EUR Setups
Markets approached the ECB choice with cautious optimism as varied items of the worldwide puzzle appeared to be falling into place. The U.S. had simply secured a commerce take care of Japan, elevating hopes that related progress could possibly be made with the EU earlier than the August 1 tariff deadline.
Including to the constructive backdrop, U.S. employment information continued to color an image of financial resilience, although this was sophisticated by persistent hypothesis about Fed price cuts and questions on central financial institution independence following Trump’s feedback that Powell “will likely be out quickly.”
EU conferences with China, together with experiences that member states authorized potential counter measures ought to discussions with the U.S. break down earlier than August 1, appeared to reassure buyers that the area may take pleasure in some commerce resilience.
World flash PMI releases within the hours main as much as the precise ECB announcement additionally turned out largely constructive, notably within the Euro Space, which noticed barely slower contraction in France and Germany, retaining merchants in a little bit of a cheery temper main as much as the occasion.
The greenback’s ongoing weak point, pushed by these Fed-related issues and rising price reduce expectations, offered a further tailwind for EUR/USD positioning forward of the ECB assertion and press convention.
EUR/USD Web Bullish EUR Occasion consequence + Threat-On State of affairs = Arguably one of the best odds of a internet constructive consequence
EUR/USD 1-hour Foreign exchange Chart by TradingView
In our watchlist dialogue, we anticipated bullish EUR/USD conduct if the ECB struck a much less dovish tone. Our evaluation instructed waiting for dips to the Fibonacci retracement ranges, notably the 61.8% Fib across the pattern line and former resistance zone.
The pair was buying and selling round 1.1744 on the time of our watchlist put up. After the ECB announcement, EUR/USD initially dipped barely however discovered assist effectively above our recognized technical ranges. The true transfer got here throughout Lagarde’s press convention, the place her optimistic feedback sparked a rally that took the pair to contemporary weekly highs above 1.1788.
In our authentic watchlist we mentioned, “Look out for dips to the Fibonacci retracement ranges, notably the 61.8% Fib across the pattern line and former resistance zone, that would appeal to extra patrons if the ECB announcement highlights a shift away from their earlier dovish stance.”
Nevertheless, worth by no means reached our recognized assist zone round 1.1670-1.1680. Merchants would have wanted to place their entries greater than our mentioned ranges – both catching the shallow pullback after the preliminary announcement or chasing the rally throughout Lagarde’s presser to attain a internet constructive consequence.
Not Eligible to maneuver past Watchlist – Bearish EUR Setups and EUR/AUD lengthy setup
EUR/AUD: Bullish EUR Occasion consequence + Threat-Off State of affairs
EUR/AUD 1-hour Foreign exchange Chart by TradingView
EUR/AUD was invalided as each the danger surroundings leaned on and the goal space of curiosity was blown via effectively forward of the goal occasion. However for many who continued to observe, the pair did current a authentic setup put up ECB occasion.
It discovered assist on the Pivot S1 assist space and intraweek swing low (roughly 1.7768) after the occasion, and with RBA’s ongoing easing bias revealed of their latest minutes, the reversal again to the upside would have been a legit lengthy set off, a minimum of with low conviction (50% – 60%). And the end result for that setup would have been internet constructive, exhibiting that generally you must name an audible on the play in actual time as you tackle new data.
EUR/JPY Quick: Web Bearish EUR Occasion consequence + Threat-Off State of affairs
EUR/JPY 1-hour Foreign exchange Chart by TradingView
This setup was predicated on a dovish ECB shock and broad risk-off sentiment. With the ECB delivering a neutral-to-hawkish message and danger sentiment remaining constructive (Japan had simply secured its commerce take care of the U.S.), the basic case for EUR/JPY weak point didn’t materialize.
In actual fact, EUR/JPY ended up being one of many stronger performers post-ECB, gaining 0.43% within the hours following Lagarde’s presser. The pair’s power mirrored each the euro’s broad rally and the yen’s ordinary relative weak point in a risk-on surroundings state of affairs.
EUR/GBP Quick: Bearish EUR Occasion consequence + Threat-Off State of affairs
EUR/GBP 1-hour Foreign exchange Chart by TradingView
Equally, our EUR/GBP bearish setup didn’t set off as the basic state of affairs didn’t align. We had been waiting for the pair to face resistance round 0.8700 and probably reverse decrease if Sterling benefited from risk-on flows whereas the euro struggled.
As an alternative, EUR/GBP really gained 0.40% following the ECB occasion, as Lagarde’s optimistic tone plus arguably internet adverse UK flash PMI updates seemingly outweighed any presumably power the British pound may have drawn in from the improved danger sentiment surroundings.
The Verdict
Our basic evaluation accurately anticipated the opportunity of a much less dovish ECB stance, figuring out that latest financial indicators had been internet constructive and that policymakers had been emphasizing warning on additional easing. This evaluation proved correct as Lagarde delivered an optimistic evaluation of the eurozone economic system.
Nevertheless, our technical execution confronted challenges. Whereas EUR/USD did observe our anticipated bullish trajectory, however the shallow nature of the pullback meant our recognized assist ranges close to 1.1670-1.1680 by no means got here into play. Merchants following our watchlist would have wanted to adapt their entry technique – both taking positions at greater ranges or ready for a post-event pullback that by no means materialized to our goal zones.
The technique execution highlighted an essential lesson: when basic catalysts are robust (on this case, a clearly much less dovish ECB), technical assist ranges will not be examined as worth motion can stay elevated. The market’s response to Lagarde’s feedback was swift and decisive, leaving little room for optimum technical entries at our pre-identified ranges.
Total, we price our discussions as “Impartial” when it comes to being supportive of a internet constructive consequence. Whereas our basic learn was spot-on and the directional bias proved right, the technical execution parameters for the legit EUR/USD setup we outlined had been too conservative given the power of the ECB’s message. Profitable merchants would have wanted to both place extra aggressively forward of the occasion or chase the transfer throughout Lagarde’s presser.
Key Takeaways:
Central Financial institution Communication Trumps Technical Ranges
When a central financial institution delivers a transparent shift in tone, because the ECB did with Lagarde’s “good place” feedback, technical assist ranges can grow to be secondary (or not matter in any respect in some instances). The market’s response was fast and sustained, demonstrating that basic catalysts can override technical issues within the brief time period.
Be ready to adapt entry methods when basic drivers are notably robust. Contemplate scaling into positions or utilizing market orders throughout high-conviction occasions slightly than ready for particular technical ranges that won’t materialize.
The Energy of Relative Central Financial institution Positioning
Discover how EUR crosses carried out in another way primarily based on the relative stance of every central financial institution pair:
- EUR/USD: Rallied because the ECB sounded much less dovish whereas Fed reduce expectations continued
- EUR/JPY: Gained strongly as each currencies had totally different danger profiles
- EUR/GBP: Rose with the assistance of contemporary bearish UK sentiment updates
- EUR/AUD: Seemingly benefited from ECB/RBA divergence given Australia’s easing bias
At all times contemplate the relative positioning of central banks, not simply absolute stances. A “impartial” ECB can seem hawkish when paired towards a dovish Fed or RBA narrative.
Threat Sentiment as a Secondary Driver
Whereas danger sentiment was typically constructive (US-Japan commerce deal, enhancing PMIs), it performed second fiddle to the ECB’s communication. This demonstrates that in main central financial institution occasions, financial coverage indicators typically override broader market themes, a minimum of within the fast aftermath.
In most eventualities, don’t obese danger sentiment throughout central financial institution occasions, particularly the highest 3 or 4 main central banks (Fed, BOJ, BOE, and ECB). Focus first on the coverage message and work out the quantity of weight it might seemingly have on a foreign money, then flip to danger urge for food and assess there to see if broad market vibes deserve the identical weighting in your goal asset.
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