This week, the euro (EUR) has struggled against the US dollar (USD). Attempts to rebound from a low of 1.1805 have faltered just below 1.1850, with the euro hovering around 1.1835. This comes amid speculation that European Central Bank (ECB) President Christine Lagarde may resign before her term ends in October 2027.
A report from the Financial Times on Wednesday suggested that Lagarde is contemplating stepping down ahead of France’s general elections set for April 2027. This could potentially allow French President Emmanuel Macron and German Chancellor Friedrich Merz to select her successor.
The market reacted to this news, causing some ripples as investors leaned towards a more cautious approach, especially with the upcoming release of the Federal Reserve’s January meeting minutes later that day. In addition, the figures on fourth-quarter gross domestic product (GDP) and January personal consumption expenditure (PCE) price indexes, due Friday, are likely to influence the currency pair’s direction in the short run.
Technical analysis: EUR/USD remains under pressure below the countertrend line
EUR/USD has found some support near the 1.1800 mark, but the trend still leans bearish. Currently, it’s situated below the broken trend line around 1.1880. The technical indicators on the 4-hour chart remain slightly unfavorable; the Moving Average Convergence Divergence (MACD) is below zero and the Relative Strength Index (RSI) is also under the midpoint at 43, which aligns with a subdued market mood.
Resistance is forming around 1.1855, effectively keeping the bulls at bay for the moment, particularly below the aforementioned trend line and the area between 1.1880 and 1.1890 where the highs from February 12th and 13th meet with the 38.2 Fibonacci retracement of the decline observed in late January.
Looking downward, immediate support is at Tuesday’s low of 1.1805, which could impede progress toward the low of 1.1765 from February 6.
(The technical analysis in this story was assisted by AI tools.)
(This story was corrected on 18 February 09:48 GMT to indicate that French elections will be held in April 2027, as opposed to May 2027 as previously stated.)
ECB FAQ
The European Central Bank (ECB), based in Frankfurt, is the reserve bank for the euro area. It sets interest rates and manages monetary policy with a goal of price stability, targeting an inflation rate of around 2%. Key decisions on monetary policy are made during its eight annual meetings by the heads of euro zone national banks and the six permanent members of the ECB, which includes Christine Lagarde.
In severe situations, the ECB can introduce a policy known as quantitative easing (QE). This involves printing euros to purchase assets, primarily government and corporate bonds, from banks and financial institutions. Typically, this strategy weakens the euro and is employed when price stability cannot be achieved through lower interest rates alone. The ECB utilized QE during the financial crisis from 2009-2011, in 2015 with persistently low inflation, and during the pandemic.
On the other hand, quantitative tightening (QT) is the reverse of QE. This occurs after QE, typically when the economy is recovering and inflation starts to rise. In this phase, the ECB ceases purchasing additional bonds and does not reinvest the principal from matured bonds, which is generally a positive sign for the euro.
