With the ECB holding charges regular and President Lagarde emphasizing that the economic system is in a “good place,” markets navigated the fragile steadiness between optimistic financial assessments and lingering considerations over EU-US commerce negotiations.
Let’s look at which pairs from our watchlist made sense to maneuver ahead on, and the way they carried out on this surroundings of reasonable conviction and combined elementary drivers.
Watchlists are value outlook & technique discussions supported by each elementary & technical evaluation, an important step in the direction of making a top quality discretionary commerce thought earlier than engaged on a threat & commerce administration plan.
In case you’d prefer to observe our “Watchlist” picks proper when they’re revealed all through the week, take a look at our BabyPips Premium subscribe web page to be taught extra!
The Setup
- What We Had been Watching: ECB Financial Coverage Assertion for July 2025
- The Expectation: ECB to take care of important refinancing price at 2.15%
- Knowledge end result: Charges held regular as anticipated, with Lagarde placing a much less dovish tone than anticipated
- Market surroundings surrounding the occasion: Impartial to optimistic threat sentiment; easing commerce deal considerations, and cautious risk-taking because the U.S. prints optimistic employment information
Occasion End result
The ECB delivered precisely what markets anticipated when it comes to coverage motion – no change to rates of interest. Nonetheless, the true story unfolded throughout President Lagarde’s press convention, the place she struck a notably optimistic tone concerning the eurozone economic system.
Key factors from the ECB resolution:
- All three key rates of interest remained unchanged, marking a pause after seven consecutive 25bp cuts
- Inflation at the moment sits on the ECB’s 2% medium-term goal
- Home value pressures proceed to ease, with wages rising extra slowly
- Lagarde emphasised the financial institution stays “data-dependent” and follows a meeting-by-meeting strategy
- The ECB President downplayed considerations about potential inflation undershooting, stating that “a minor inflation undershooting didn’t pose an issue because it was the medium-term outlook that mattered.“
Elementary Bias Triggered: Much less Dovish EUR Setups
Markets approached the ECB resolution with cautious optimism as numerous items of the worldwide puzzle appeared to be falling into place. The U.S. had simply secured a commerce cope with Japan, elevating hopes that comparable progress could possibly be made with the EU earlier than the August 1 tariff deadline.
Including to the constructive backdrop, U.S. employment information continued to color an image of financial resilience, although this was sophisticated by persistent hypothesis about Fed price cuts and questions on central financial institution independence following Trump’s feedback that Powell “will probably be out quickly.”
EU conferences with China, together with experiences that member states accredited potential counter measures ought to discussions with the U.S. break down earlier than August 1, appeared to reassure traders that the area might get pleasure from some commerce resilience.
World flash PMI releases within the hours main as much as the precise ECB announcement additionally turned out principally optimistic, notably within the Euro Space, which noticed barely slower contraction in France and Germany, holding merchants in a little bit of a cheery temper main as much as the occasion.
The greenback’s ongoing weak spot, pushed by these Fed-related considerations and rising price minimize expectations, offered a further tailwind for EUR/USD positioning forward of the ECB assertion and press convention.
EUR/USD Web Bullish EUR Occasion end result + Threat-On Situation = Arguably the very best odds of a internet optimistic end result
EUR/USD 1-hour Foreign exchange Chart by TradingView
In our watchlist dialogue, we anticipated bullish EUR/USD habits if the ECB struck a much less dovish tone. Our evaluation prompt awaiting dips to the Fibonacci retracement ranges, notably the 61.8% Fib across the development line and former resistance zone.
The pair was buying and selling round 1.1744 on the time of our watchlist put up. After the ECB announcement, EUR/USD initially dipped barely however discovered help nicely above our recognized technical ranges. The actual transfer got here throughout Lagarde’s press convention, the place her optimistic feedback sparked a rally that took the pair to contemporary weekly highs above 1.1788.
In our unique watchlist we mentioned, “Look out for dips to the Fibonacci retracement ranges, notably the 61.8% Fib across the development line and former resistance zone, that would entice extra patrons if the ECB announcement highlights a shift away from their earlier dovish stance.”
Nonetheless, value by no means reached our recognized help zone round 1.1670-1.1680. Merchants would have wanted to place their entries larger than our mentioned ranges – both catching the shallow pullback after the preliminary announcement or chasing the rally throughout Lagarde’s presser to realize a internet optimistic end result.
Not Eligible to maneuver past Watchlist – Bearish EUR Setups and EUR/AUD lengthy setup
EUR/AUD: Bullish EUR Occasion end result + Threat-Off Situation
EUR/AUD 1-hour Foreign exchange Chart by TradingView
EUR/AUD was invalided as each the danger surroundings leaned on and the goal space of curiosity was blown via nicely forward of the goal occasion. However for many who continued to look at, the pair did current a reliable setup put up ECB occasion.
It discovered help on the Pivot S1 help space and intraweek swing low (roughly 1.7768) after the occasion, and with RBA’s ongoing easing bias revealed of their current minutes, the reversal again to the upside would have been a legit lengthy set off, at the very least with low conviction (50% – 60%). And the end result for that setup would have been internet optimistic, displaying that generally you must name an audible on the play in actual time as you tackle new data.
EUR/JPY Brief: Web Bearish EUR Occasion end result + Threat-Off Situation
EUR/JPY 1-hour Foreign exchange Chart by TradingView
This setup was predicated on a dovish ECB shock and broad risk-off sentiment. With the ECB delivering a neutral-to-hawkish message and threat sentiment remaining constructive (Japan had simply secured its commerce cope with the U.S.), the basic case for EUR/JPY weak spot didn’t materialize.
The truth is, EUR/JPY ended up being one of many stronger performers post-ECB, gaining 0.43% within the hours following Lagarde’s presser. The pair’s power mirrored each the euro’s broad rally and the yen’s normal relative weak spot in a risk-on surroundings situation.
EUR/GBP Brief: Bearish EUR Occasion end result + Threat-Off Situation
EUR/GBP 1-hour Foreign exchange Chart by TradingView
Equally, our EUR/GBP bearish setup didn’t set off as the basic situation didn’t align. We had been awaiting the pair to face resistance round 0.8700 and doubtlessly reverse decrease if Sterling benefited from risk-on flows whereas the euro struggled.
As an alternative, EUR/GBP truly gained 0.40% following the ECB occasion, as Lagarde’s optimistic tone plus arguably internet detrimental UK flash PMI updates probably outweighed any probably power the British pound might have drawn in from the improved threat sentiment surroundings.
The Verdict
Our elementary evaluation accurately anticipated the potential of a much less dovish ECB stance, figuring out that current financial indicators had been internet optimistic and that policymakers had been emphasizing warning on additional easing. This evaluation proved correct as Lagarde delivered an optimistic evaluation of the eurozone economic system.
Nonetheless, our technical execution confronted challenges. Whereas EUR/USD did observe our anticipated bullish trajectory, however the shallow nature of the pullback meant our recognized help ranges close to 1.1670-1.1680 by no means got here into play. Merchants following our watchlist would have wanted to adapt their entry technique – both taking positions at larger ranges or ready for a post-event pullback that by no means materialized to our goal zones.
The technique execution highlighted an necessary lesson: when elementary catalysts are sturdy (on this case, a clearly much less dovish ECB), technical help ranges is probably not examined as value motion can stay elevated. The market’s response to Lagarde’s feedback was swift and decisive, leaving little room for optimum technical entries at our pre-identified ranges.
General, we price our discussions as “Impartial” when it comes to being supportive of a internet optimistic end result. Whereas our elementary learn was spot-on and the directional bias proved right, the technical execution parameters for the legit EUR/USD setup we outlined had been too conservative given the power of the ECB’s message. Profitable merchants would have wanted to both place extra aggressively forward of the occasion or chase the transfer throughout Lagarde’s presser.
Key Takeaways:
Central Financial institution Communication Trumps Technical Ranges
When a central financial institution delivers a transparent shift in tone, because the ECB did with Lagarde’s “good place” feedback, technical help ranges can turn into secondary (or not matter in any respect in some instances). The market’s response was rapid and sustained, demonstrating that elementary catalysts can override technical issues within the quick time period.
Be ready to adapt entry methods when elementary drivers are notably sturdy. Think about scaling into positions or utilizing market orders throughout high-conviction occasions quite than ready for particular technical ranges that will not materialize.
The Energy of Relative Central Financial institution Positioning
Discover how EUR crosses carried out in a different way based mostly on the relative stance of every central financial institution pair:
- EUR/USD: Rallied because the ECB sounded much less dovish whereas Fed minimize expectations endured
- EUR/JPY: Gained strongly as each currencies had completely different threat profiles
- EUR/GBP: Rose with the assistance of contemporary bearish UK sentiment updates
- EUR/AUD: Probably benefited from ECB/RBA divergence given Australia’s easing bias
All the time contemplate the relative positioning of central banks, not simply absolute stances. A “impartial” ECB can seem hawkish when paired towards a dovish Fed or RBA narrative.
Threat Sentiment as a Secondary Driver
Whereas threat sentiment was typically optimistic (US-Japan commerce deal, bettering PMIs), it performed second fiddle to the ECB’s communication. This demonstrates that in main central financial institution occasions, financial coverage alerts typically override broader market themes, at the very least within the rapid aftermath.
In most situations, don’t obese threat sentiment throughout central financial institution occasions, particularly the highest 3 or 4 main central banks (Fed, BOJ, BOE, and ECB). Focus first on the coverage message and work out the quantity of weight it will probably have on a foreign money, then flip to threat urge for food and assess there to see if broad market vibes deserve the identical weighting in your goal asset.
The foreign exchange evaluation content material offered in Babypips.com is meant solely for informational functions solely. The technical and elementary situations mentioned are offered to spotlight and educate on the way to spot potential market alternatives which will warrant additional unbiased analysis and due diligence. This content material reveals how we cowl a portion of the total buying and selling course of, and doesn’t represent that we ever give particular funding or buying and selling recommendation. The setups and analyses offered on Babypips.com are very probably not appropriate for all portfolios or buying and selling kinds.
Commerce and threat administration are the only duty of every particular person dealer. All buying and selling choices and their subsequent outcomes are the unique duty of the person making them. Please commerce responsibly.
Buying and selling responsibly means understanding as a lot as you’ll be able to a few market earlier than you concentrate on taking up threat, and when you suppose this sort of content material can assist you with that, take a look at our BabyPips Premium subscribe web page to be taught extra!
