EUR/USD forecast: ECB rate outlook supports euro

At Thursday’s meeting, ECB officials kept monetary policy unchanged, maintaining the deposit rate at 2.00%, the main refinancing rate at 2.15%, and the marginal lending rate at 2.40%. However, the likelihood of a shift toward a more hawkish stance has increased significantly. Analysts at Barclays Plc. expect borrowing costs to rise by 75 basis points this year, with adjustments potentially starting in April and continuing in June and July. While gas supply conditions in the EU remain relatively stable, disruptions in oil and refined product deliveries have led to a sharp increase in energy prices. As a result, experts forecast that next month the key rate could rise to 2.40%, the marginal lending rate to 2.65%, and the deposit rate to 2.25%. Despite these pressures, the euro continues to show relative stability against its peers. Meanwhile, the ECB revised its economic outlook, now expecting GDP growth of just 0.9% this year, down from a previous estimate of 1.2%. Analysts emphasize that the Middle East conflict will significantly impact inflation in the short term through rising energy costs, while longer-term effects will depend on the scale and duration of the crisis. ECB President Christine Lagarde reaffirmed the commitment to returning inflation to the 2.0% target, while highlighting the growing level of geopolitical uncertainty.

The US dollar, which largely drives price dynamics, is trading near 99.40 in the USDX index and is struggling to extend its recent upward movement after testing the 100.00 level. Iranian attacks on energy infrastructure have weakened the currency, as capital flows temporarily shifted into oil markets. Additionally, a representative of Iran’s military command warned that if the US proceeds with actions targeting the country’s energy system, Tehran will respond by fully blocking the Strait of Hormuz until damaged infrastructure is restored, as well as targeting Israeli facilities. Global leaders have expressed serious concern over the escalating tensions, particularly due to risks surrounding one of the key routes for global oil and LNG supplies, which accounts for up to 20% of global traffic. Representatives of 22 countries condemned Iran’s actions, including attacks on civilian vessels and infrastructure, and called for an immediate cessation of hostilities. Several major economies, including the UK, France, Germany, Italy, the Netherlands, Japan, and later Canada, have signaled readiness to take stronger measures, with broader international support continuing to grow.

The recent Federal Reserve meeting, where rates were kept at 3.50–3.75%, had a limited immediate market impact. However, updated macroeconomic projections and comments from Chair Jerome Powell proved more influential. The dot plot showed that 12 out of 19 officials still expect at least one rate cut by year-end, although the overall tone has shifted toward a longer period of tight monetary conditions amid rising inflation risks linked to the energy crisis.

Support and resistance levels

On the daily chart, the instrument is attempting to remain below the resistance line of a descending channel with boundaries at 1.1580–1.1300.

Technical indicators maintain a sell signal formed earlier this month: fast EMAs of the Alligator indicator remain below the signal line, expanding the price range, while the AO histogram forms corrective bars in negative territory.

Resistance levels: 1.1670, 1.1920.

Support levels: 1.1460, 1.1170.

Trading scenarios and EUR/USD forecast

Short positions may be considered after a breakdown and consolidation below 1.1460, with a target near 1.1170. Stop-loss — 1.1530. Implementation period: 7 days or more. Long positions may be considered after a breakout and consolidation above 1.1670, with a target near 1.1920. Stop-loss — 1.1580.