EUR/USD signal ahead of the ECB decision and US GDP data

The EUR/USD pair declined for the third straight day as investors wait for the upcoming interest rate decision by the European Central Bank (ECB). The pair fell to a low of 1.1600, which was about 0.70% below the highest level this month.

ECB decision preview

The Eurozone economy has staged a strong recovery in the past few months. Most of this growth has been helped by the services sector as hotels, restaurants, and other tourism spots reopen. 

At the same time, the manufacturing sector has also done well as evidenced by the fact that the PMI has remained above 50 for months. Nonetheless, manufacturers are still facing the challenge of supply bottlenecks and high cost of doing business.

Meanwhile, consumer prices have jumped sharply in the past few months. Recent data by Eurostat showed that consumer prices in the bloc rose at a 13-year high of 3.4%. This trend is expected to continue because of the rising energy costs. Natural gas has surged to an all-time high while Brent and West Texas Intermediate (WTI) have jumped to a 7-year high.

It is against this backdrop that the European Central Bank (ECB) is holding its meeting. In the decision that will come out on Thursday, analysts expect that the central bank will leave interest rates unchanged. 

Still, the EUR/USD will react to the statement on quantitative easing. Analysts expect that the ECB will provide hints that it will start to wind down asset purchases soon. Also, many of them expect that the bank will provide signals that it will not start its hiking cycle soon.

Meanwhile, the pair will also react to the latest US GDP data that will come out tomorrow. These will be important numbers because they will be the first estimates for the third quarter.

EUR/USD forecast

The daily chart shows that the EUR/USD pair started the month in a bullish tone. It managed to move from last month’s low of 1.1524 to a high of 1.1670. The pair struggled moving above that resistance several times during the month. It also formed a bearish break and retest pattern. 

The EURUSD pair is also below the 25-day and 50-day moving averages. Therefore, there is a likelihood that the bearish trend will continue as bears target the next key support level at 1.1525.