With the ECB holding charges regular and President Lagarde emphasizing that the financial system is in a “good place,” markets navigated the fragile stability between optimistic financial assessments and lingering issues over EU-US commerce negotiations.
Let’s study which pairs from our watchlist made sense to maneuver ahead on, and the way they carried out on this atmosphere of average conviction and combined elementary drivers.
Watchlists are value outlook & technique discussions supported by each elementary & technical evaluation, a vital step in direction of making a top quality discretionary commerce thought earlier than engaged on a danger & commerce administration plan.
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The Setup
- What We Have been Watching: ECB Financial Coverage Assertion for July 2025
- The Expectation: ECB to keep up fundamental refinancing price at 2.15%
- Information final result: Charges held regular as anticipated, with Lagarde placing a much less dovish tone than anticipated
- Market atmosphere surrounding the occasion: Impartial to optimistic danger sentiment; easing commerce deal issues, and cautious risk-taking because the U.S. prints optimistic employment knowledge
Occasion Consequence
The ECB delivered precisely what markets anticipated by way of 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 in regards to the eurozone financial system.
Key factors from the ECB determination:
- All three key rates of interest remained unchanged, marking a pause after seven consecutive 25bp cuts
- Inflation at present 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 method
- The ECB President downplayed issues about potential inflation undershooting, stating that “a minor inflation undershooting didn’t pose an issue because it was the medium-term outlook that mattered.“
Basic Bias Triggered: Much less Dovish EUR Setups
Markets approached the ECB determination with cautious optimism as numerous items of the worldwide puzzle gave the impression to be falling into place. The U.S. had simply secured a commerce take care of Japan, elevating hopes that comparable progress may very well be made with the EU earlier than the August 1 tariff deadline.
Including to the constructive backdrop, U.S. employment knowledge 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 reviews that member states accepted potential counter measures ought to discussions with the U.S. break down earlier than August 1, appeared to reassure buyers that the area may 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, significantly within the Euro Space, which noticed barely slower contraction in France and Germany, maintaining 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 issues and rising price lower expectations, supplied an extra tailwind for EUR/USD positioning forward of the ECB assertion and press convention.
EUR/USD Web Bullish EUR Occasion final result + Threat-On State of affairs = Arguably one of the best odds of a internet optimistic final result
EUR/USD 1-hour Foreign exchange Chart by TradingView
In our watchlist dialogue, we anticipated bullish EUR/USD conduct if the ECB struck a much less dovish tone. Our evaluation steered expecting dips to the Fibonacci retracement ranges, significantly the 61.8% Fib across the pattern line and former resistance zone.
The pair was buying and selling round 1.1744 on the time of our watchlist publish. After the ECB announcement, EUR/USD initially dipped barely however discovered assist effectively 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 authentic watchlist we stated, “Look out for dips to the Fibonacci retracement ranges, significantly the 61.8% Fib across the pattern line and former resistance zone, that would appeal to extra consumers if the ECB announcement highlights a shift away from their earlier dovish stance.”
Nonetheless, value by no means reached our recognized assist 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 final result.
Not Eligible to maneuver past Watchlist – Bearish EUR Setups and EUR/AUD lengthy setup
EUR/AUD: Bullish EUR Occasion final result + Threat-Off State of affairs
EUR/AUD 1-hour Foreign exchange Chart by TradingView
EUR/AUD was invalided as each the danger atmosphere leaned on and the goal space of curiosity was blown by means of effectively forward of the goal occasion. However for many who continued to look at, the pair did current a respectable setup publish ECB occasion.
It discovered assist on the Pivot S1 assist space and intraweek swing low (roughly 1.7768) after the occasion, and with RBA’s ongoing easing bias revealed of their latest minutes, the reversal again to the upside would have been a legit lengthy set off, not less than with low conviction (50% – 60%). And the result for that setup would have been internet optimistic, exhibiting that typically you must name an audible on the play in actual time as you tackle new data.
EUR/JPY Quick: Web Bearish EUR Occasion final result + Threat-Off State of affairs
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 danger sentiment remaining constructive (Japan had simply secured its commerce take care of the U.S.), the basic case for EUR/JPY weak spot didn’t materialize.
In reality, 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 typical relative weak spot in a risk-on atmosphere situation.
EUR/GBP Quick: Bearish EUR Occasion final result + Threat-Off State of affairs
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 expecting 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 really gained 0.40% following the ECB occasion, as Lagarde’s optimistic tone plus arguably internet damaging UK flash PMI updates seemingly outweighed any probably power the British pound may have drawn in from the improved danger sentiment atmosphere.
The Verdict
Our elementary evaluation appropriately anticipated the potential of a much less dovish ECB stance, figuring out that latest 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 financial 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 assist 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 vital lesson: when elementary catalysts are robust (on this case, a clearly much less dovish ECB), technical assist ranges will not be 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” by way of being supportive of a internet optimistic final result. Whereas our elementary learn was spot-on and the directional bias proved appropriate, 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 assist ranges can change into secondary (or not matter in any respect in some circumstances). The market’s response was speedy and sustained, demonstrating that elementary catalysts can override technical concerns within the quick time period.
Be ready to adapt entry methods when elementary drivers are significantly robust. Contemplate scaling into positions or utilizing market orders throughout high-conviction occasions slightly than ready for particular technical ranges that won’t materialize.
The Energy of Relative Central Financial institution Positioning
Discover how EUR crosses carried out in a different way primarily based on the relative stance of every central financial institution pair:
- EUR/USD: Rallied because the ECB sounded much less dovish whereas Fed lower expectations continued
- EUR/JPY: Gained strongly as each currencies had completely different danger profiles
- EUR/GBP: Rose with the assistance of contemporary bearish UK sentiment updates
- EUR/AUD: Doubtless benefited from ECB/RBA divergence given Australia’s easing bias
All the time think about 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 danger sentiment was typically optimistic (US-Japan commerce deal, enhancing 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, not less than within the speedy aftermath.
In most situations, don’t obese danger 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 could seemingly have on a forex, then flip to danger 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 supplied in Babypips.com is meant solely for informational functions solely. The technical and elementary situations mentioned are introduced to spotlight and educate on learn how to spot potential market alternatives that will warrant additional impartial analysis and due diligence. This content material reveals how we cowl a portion of the complete buying and selling course of, and doesn’t represent that we ever give particular funding or buying and selling recommendation. The setups and analyses introduced on Babypips.com are very seemingly not appropriate for all portfolios or buying and selling types.
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