The European Central Bank may cut interest rates this month.

The euro weakened slightly as investors prepared for the European Central Bank (ECB) to potentially reduce interest rates by another 25 basis points after cutting rates four times in 2024. Additionally, investors are closely monitoring various economic signals that could influence future interest rate forecasts. There is also an expectation among investors of further rate cuts in the coming months.

In the United States, investors expect the Federal Reserve to maintain its current interest rate levels, despite pressure from President Donald Trump to lower rates swiftly. However, the U.S. dollar has strengthened again due to the implementation of tariffs on imports such as semiconductors, steel, and automobiles from Canada and Mexico.

The Eurozone's manufacturing PMI slightly increased to 46.1 in January, though the figure still reflects the sector's most significant contraction in eight months. Manufacturing activities remain impacted by a slowdown in new business and employment. Meanwhile, new orders have dropped sharply. On the production cost front, there was a rise for the first time in five months. Nevertheless, business confidence in manufacturing reached its highest level in seven months, even though concerns about a potential economic recession persist. This is evident in the continued decline in employment. However, manufacturers remain optimistic about a production increase in the next year, as there is a sense that the worst may have passed.

On the other hand, the Eurozone's services PMI slightly declined to 51.4 from 51.6 in December. While the figure indicates expansion in the services sector, it continues to face pressure from a slowdown in foreign demand. However, new business growth resumed, aligning with the highest employment growth in six months. In terms of costs, raw material prices surged significantly, hitting a nine-month high, while increased reports of labor cost pressures followed. As a result, confidence in the services sector slightly declined.

The Eurozone consumer confidence index rose slightly to -14.2 in January, up by 0.3 points, in line with market expectations. Consumers continue to anticipate further interest rate cuts by the ECB this year, with expectations for another cut on January 30, bringing the rate down to 2% by the end of the year. Inflation is projected to return to the ECB's 2% target by mid-year.

In the December 2024 meeting, the ECB emphasized the importance of cautious and gradual rate cuts, prioritizing inflation while also focusing on economic growth within the bloc. Policymakers highlighted the need to monitor additional economic data, particularly unemployment rates. Many policymakers also supported quicker rate cuts to support an economy that may face a slowdown in the near future.

Techical analysis data (5H)

Resistance: 0.96, 0.9608, 0.9622

Source: Investing.com

Buy/Long 1: If the price touches support in the price range of 0.9566 - 0.9579 but cannot break the support at 0.9579, you may set a TP at approximately 0.9608 and SL at around 0.9557 or according to your acceptable risk.

Buy/Long 2: If the price breaks the resistance in the price range of 0.96 - 0.9608, you may set a TP at approximately 0.9622 and SL at around 0.9566 or according to your acceptable risk.

Sell/Short 1: If the price touches resistance in the price range of 0.96 - 0.9608 but cannot break the resistance at 0.96, you may set a TP at approximately 0.9566 and SL at around 0.9622 or according to your acceptable risk.

Sell/Short 2: If the price breaks the support in the price range of 0.9566 - 0.9579, you may set a TP at approximately 0.9557 and SL at around 0.9608 or according to your acceptable risk.

Pivot point January 28, 2025 07:31 PM. GMT+7