Would rather wait and see than cut interest rates in a hurry? The European Bank's three-piece set will determine the final jump of the euro

On Thursday (September 11), the euro/dollar European session traded sideways at 1.1690, still close to the relative high since late July. The European Central Bank will announce its interest rate decision at 20:15 today, followed by a press conference and an updated macro forecast by Christine Lagarde, the governor. As volatility in foreign exchange and equity markets picked up near the resolution, traders focused on the details of the wording "whether to end the rate cut cycle here".

Fundamentals

After suspending interest rate cuts in July, new trade arrangements were finalized between Europe and the United States, in which a unified tariff of 15% was set on goods exported from the European Union to the United States; superimposed on the second quarter of the euro zone GDP growth of 0.1% (previous value of 0.6%), and August HICP 2.1% year-on-year (July 2.0%) and higher than expected, the market is generally expected to maintain the main interest rate unchanged this time.

More critical is forward guidance: the BBH said the swap market was pricing in a 25 basis point rate cut over the next 12 months with a 75 per cent probability, but a Reuters poll showed that most economists thought the rate cut cycle was probably over. The analysis judged that the main line of the conference will be "economic resilience and the reduction of external uncertainty". When asked about risks, Lagarde may emphasize that the Governing Council is "in a good position", but will not explicitly hint at the path of subsequent interest rate cuts. Meanwhile, the French parliament this week voted to oust Prime Minister Franc ̧ ois Berrou and the minority cabinet, causing political noise, but the direct impact on the central bank's decisions and forecasts is limited.

This time, the staff macro path will also be updated, focusing on the output gap, potential growth rate and inflation hub. If the potential growth rate is revised down and inflation remains above the target, the neutral interest rate will be passively raised, and the threshold for interest rate reduction will be higher; otherwise, output and inflation will be revised down simultaneously, and the necessity of resuming easing will increase. In contrast, the Federal Reserve emphasizes "data dependence" and does not commit to rapid easing. Differences in the communication strategies of the two central banks allow relative policy expectations to continue to dominate the exchange rate.

Technical aspects:

On the 240-minute K-line chart, the middle rail of the Bollinger Band is 1.1719, the upper rail is 1.1774, and the lower rail is 1.1663; the current quotation is around 1.1690, which is below the middle rail and close to the early oscillation center. From the observation of the K-line structure, the recent candles are too small, the upper and lower shadows coexist, and the oscillation characteristics are obvious; the middle rail 1.1719 has been repeatedly tested by the upper shadow and has not been recovered, showing dynamic pressure.

The DIFF of the MACD is -0.0001, the DEA is 0.0005, and the MACD column is -0.0013, which makes the kinetic energy slightly bearish but not extreme; the RSI (14) is 44.5313, which is lower than the boundary between boom and bust at 50, indicating that the bulls' kinetic energy has not yet fully recovered. If the price continues to be pressured in the 1.1719 area (Bollinger middle rail), the first resistance above looks at 1.1774 and forms a heavy resistance area with the swing high of 1.1779; the lower support focuses on the 1.1663 and 1.1640 levels in turn, and then the lower one is 1.1607 and 1.1573. The Bollinger band bandwidth has been enlarged compared with the previous period. If the lower rail continues to rise and the price holds 1.1663, it is expected to deduce the structure of "retracement - backtest - and then up"; on the contrary, if the lower rail continues to rise and falls below 1.1640, the homeopathic selling pressure may increase, and the short-term will be transferred to the risk

Market Sentiment Watch

The pricing of futures and swaps is forming a market consensus around "the European Central Bank is sitting still but no longer in a hurry to cut interest rates". At the same time, the market expects that the Federal Reserve's marginal easing still needs more economic data to verify, and the imagined space for policy differentiation supports the market sentiment of the euro bulls to a certain extent. The exchange rate is near the relative high since the end of July, and the bearish mentality is accumulating; but the divergence between RSI and MACD reminds the bulls that the sentiment is not overheated, and the relationship between volume and price is closer to the state of "contraction and rise - momentum dullness".

The risk is that if there is a lack of clear forward-looking language in the press conference, or if the staff forecasts unexpected downgrades to growth and inflation this year, the sentiment may quickly switch to "risk aversion and profit-taking". From the perspective of trading microstructure, the European market tends to be dominated by passive quotes. Active orders during the New York session are more likely to drive the direction. Breakouts are best accompanied by active trading periods to reduce the probability of false breakouts. Overall, the market is still consolidating, and the direction needs to be triggered by news events.

Outlook

Short-term (event window): If the statement or press conference clearly states that "we are in a good position to wait and see" and implies that the threshold for interest rate cuts is raised, superimposed on inflation and growth in 2025, it is a "partial eagle's inaction". In this case, if the exchange rate stands at 1.1719 and effectively closes above 1.1750, the trend is expected to challenge the resistance band of 1774/1.1779, and when further enlarged, it can be pointed to 1.18. Conversely, if the forecast is revised down, or the expression returns to "remain open to subsequent interest rate cuts" and lacks threshold constraints, the market will price the "dove" reading, and the exchange rate may test 1.1663, and if it misses the rule target, it will look at 1.1640, extending to 1.1607 and 1.1573.