At a glance

• ECB kept rates unchanged, sticking to a data-dependent, meeting-by-meeting approach as 2026 inflation projections were revised higher.

• Updated forecasts leaned modestly hawkish, with firmer services inflation and stronger growth reducing the likelihood of near-term rate cuts.

• EURUSD moved higher post-decision, reclaiming its 100-hour moving average and testing key resistance near 1.1762, a level sellers are watching closely.

The ECB left interest rates unchanged, in line with expectations, and reiterated its data-dependent, meeting-by-meeting approach, avoiding any commitment to a predefined rate path. While the decision itself was neutral, updated staff projections carried a modestly hawkish tilt, led by higher 2026 inflation forecasts driven primarily by stickier services inflation alongside a stronger growth outlook.

Inflation and growth projections tilt slightly hawkish

Inflation forecasts were revised higher for 2026, with both headline and core inflation now expected to decline more slowly than previously anticipated, even as they move closer to the ECB’s 2% target. This reinforces the Governing Council’s cautious stance and supports the view that policy easing is not imminent.

At the same time, growth forecasts were revised higher, reflecting improved domestic demand conditions. The combination of firmer inflation dynamics and better growth gives the ECB room to remain patient and resist signaling near-term rate cuts.

Policy guidance unchanged, flexibility emphasized

The ECB maintained firm policy guidance, stressing that it remains ready to adjust all instruments as needed to ensure inflation stabilizes at its 2% medium-term target and to preserve the smooth transmission of monetary policy. Markets interpreted the updated projections as reducing the likelihood of cuts and slightly increasing the probability of a hike later in the cycle, even if that remains a tail risk.

Market reaction: EUR firmer, Bunds softer

Market reaction leaned modestly hawkish. The euro strengthened, Bund yields moved higher, and implied odds of a rate hike by end-2026 rose toward 30%. Despite that shift, the base case of a 2.00% terminal deposit rate remains intact, with attention now squarely on President Lagarde’s press conference for clues on whether the ECB’s next move is more likely a cut or a hike.

EURUSD technical analysis: buyers test key resistance

From a technical perspective, the EURUSD has pushed higher following the ECB decision, with price moving back above the 100-hour moving average, currently near 1.1742. That move has helped tilt the short-term bias back in favor of buyers.

The rally has now reached a key upside target at 1.1762, a level that previously acted as resistance. This price marks:

• The high from December 11

• A swing area from December 16

• A clear reference point for sellers to lean against

Importantly, yesterday’s rebound above the 100-hour MA stalled before reaching this level, but today that target has been achieved, validating it as a meaningful resistance zone.

Key levels and near-term bias

The current price is hovering just above the 100-hour moving average (see blue line on the chart below), making that level critical in the near term.

• Best-case scenario for buyers: Hold above the 100-hour MA and build acceptance above 1.1762, opening the door for further upside momentum.

• Risk for buyers: A break back below the 100-hour MA would likely disappoint longs and reinforce the idea that 1.1762 remains a solid ceiling, encouraging sellers to reassert control.

For now, the pair is caught between technical support at the 100-hour MA and resistance at 1.1762, with the next directional push likely dictated by follow-through price action and Lagarde’s tone.

On the topside he break of the 1.1762 level would next target a swing area between 1.1779 and 1.1788 ahead of the cycle high from earlier this week at 1.18037.

A move back below the 100 hour moving average would have traders looking toward the 200 hour moving average currently at 1.17067 and moving higher.

Watch the video analysis

In the video above, I (Greg Michalowski, author of Attacking Currency Trends) break down the technical factors driving EURUSD in real time, outlining the bias, the risk-defining levels, and the next upside and downside targets that matter most.

Be aware. Be prepared.