EUR/USD – ECB day: the hike is certain, the reaction is not

Today the European Central Bank announces its rate decision, and the outcome looks almost certain: markets price a quarter-point hike to 2.25% at close to 100%. It would be the ECB's first rate increase since September 2023. EUR/USD trades around 1.1545 ahead of the news, near the bottom of its recent range after last week's strong US jobs data lifted the dollar.

So why might the euro not rally on the hike? Because everyone already expects it. Traders positioned for it in advance, so the move is already priced in. What moves the market now is surprise, and this decision holds none.

The real signal comes 30 minutes later when President Lagarde speaks. If she signals more hikes are coming because inflation is still rising, the euro can climb. If she sounds worried about weak growth and frames this as a one-time move, the euro can fall even with the hike delivered. That's how a currency can drop on the same day its central bank raises rates.

With the decision, the press conference, and Middle East headlines all landing today, sharp moves in both directions are likely. Wider stops or smaller positions make sense today.

EUR/USD key levels:

• ‍‍Resistance 1.1575, then 1.1650.
• Support 1.1500, then 1.1450.

Watching: the ECB decision and Lagarde's press conference today, US-Iran headlines, next week's Fed meeting.

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