EUR/USD forecast ahead of ECB decision, US NFP data

The EUR/USD exchange rate remained on edge on Monday morning as traders focused on the upcoming European Central Bank (ECB) decision, US nonfarm payrolls (NFP), and updates on US and European tariffs. The pair was trading at 1.0415, down from last week’s high of 1.050. 

ECB interest rate decision

The ECB interest rate decision will be the main catalyst for the EUR/USD exchange rate. Economists polled by Reuters expect that the bank will deliver another 0.25% rate cut, bringing the benchmark rate to 2.50%.

The ECB has been one of the most dovish central banks as it delivered several interest rate cuts. It hopes that these cuts will help to stimulate an economy that is slowing in most countries like Germany and France. 

The ECB hopes that lower interest rate cuts will stimulate the economy by encouraging borrowing in the economy. Higher borrowing will, on the other hand, lead to more spending by companies and individuals. 

The ECB is also concerned that the upcoming tariffs by Donald Trump and the countermeasures by European authorities will affect the bloc’s economy at a time when it is making a slow recovery. 

Data to be released on Monday is expected to show that the manufacturing sector made some improvements in February. The Spanish manufacturing PMI is expected to be 51.3, up from 50.9 a month earlier. 

In Italy, the reading will come in at 46.6, a slight improvement from 46.3, while in France, it will be 45.5. The Eurozone manufacturing PMI is expected to be 47.3, up from 46.6 a month earlier. While the PMI figure is below 50, there are signs that it is moving in the right direction. 

The other key catalyst for the EUR/USD pair will be the flash European inflation data. Economists expect the data to show that the headline Consumer Price Index (CPI) fell from 2.5% to 2.3%, while the core CPI moved from 2.7% to 2.5%. 

US NFP data ahead

The other crucial EUR/USD news will come from the United States, where the Bureau of Labor Statistics (BLS) will publish the latest nonfarm payroll (NFP) data.

Economists polled by Reuters expect the report to show that the American economy created 156,000 jobs in February after adding 143k a month earlier. 

These numbers will provide more color about the ongoing job cuts by Elon Musk, the leader of the Department of Government Efficiency (DOGE). Musk has announced some major layoffs as he works to save money. 

Economists expect additional data to reveal that the unemployment rate remained unchanged at 4.0%, while the average hourly earnings rose by 4.1%.

These numbers come as the market shifts its view about the Federal Reserve. The bond and the swap market predict that the bank will start cutting interest rates earlier than expected as it reacts to the slowing economy because of the trade war.

Read more: Trump orders deeper federal layoffs as Musk outlines aggressive budget cuts

EUR/USD technical analysis

EUR/USD chart by TradingView

The daily chart shows that the EUR/USD exchange rate was trading at 1.0417 on Monday morning, a few points below the year-to-date high of 1.0523. It remains unchanged at the 23.6% Fibonacci Retracement level.

The pair has moved slightly below the 50-day moving average. It has also formed an inverse head and shoulders chart pattern, a popular reversal sign. Therefore, the EUR to USD pair will likely have a bullish breakout, with the next point to watch being at 1.0695, the 50% retracement point. A drop below the support at 1.0350 will invalidate the bullish view.