EUR/USD, Oil Forecast: Two trades to watch 230726

ECB to leave rates but could pave the way to a September hike

The ECB will announce its rate decision today at 12:15 GMT. The central bank is expected to leave its deposit rate unchanged at 2.25% after raising rates by 25 basis points in June, as policymakers assess the implications of the renewed U.S.-Iran conflict.

The ceasefire between the U.S. and Iran following June's ECB meeting sent oil prices sharply lower, helping ease inflationary pressures. However, the collapse of that ceasefire and the renewed hostilities have pushed oil back above $95 a barrel, reviving concerns over inflation and increasing the likelihood of further policy tightening.

That puts the focus firmly on ECB President Christine Lagarde's press conference. She is expected to reiterate that the ECB remains data dependent and will continue to take decisions one meeting at a time. However, investors will also be looking for any hints that another rate hike could come as early as September.

The market is currently pricing in around 41 basis points of additional tightening this year, with the deposit rate expected to reach 2.77% by March 2027.

However, the U.S. dollar is also finding support from safe-haven demand as the Middle East conflict deepens. Higher oil prices are fuelling inflation concerns, lifting Treasury yields ahead of next week's FOMC meeting.

As a result, even a hawkish hold from the ECB may struggle to generate a sustained rally in the euro towards 1.1500.

EUR/USD Forecast – Technical Analysis

EUR/USD continues to trade within a descending channel dating back to mid-April.

The pair found support at the 2026 low of 1.1325 and has staged a modest recovery, although it continues to struggle around the 1.1400–1.1450 resistance zone.

Buyers would need to break above this area to move out of the falling channel and bring 1.1500 into focus, where horizontal resistance and the 50-day EMA converge.

A move above there would expose the 200-day EMA at 1.1570, before attention turns to 1.1600, the mid-June swing high. A break above this level would strengthen the bullish outlook.

Oil extends rally for a 5th day as US-Iran conflict deepens and supply worries intensify

Oil prices are continuing to rise, with WTI heading towards $90 a barrel and Brent towards $100.

Prices are on track for a third consecutive week of gains, leaving crude up around 28% in July, which would mark the strongest monthly gain since March, when the U.S.-Iran conflict first began.

The latest leg higher comes as the U.S. and Iran exchanged fire for a 12th consecutive night, while concerns over global oil supplies continue to intensify.

Attacks on tankers in the Red Sea by Yemen's Houthis, together with the near closure of the Strait of Hormuz, mean Middle East oil exports are now facing disruption through both the Bab el-Mandeb and the Strait of Hormuz.

As a result, geopolitical risk premiums have returned to the market and are likely to keep oil prices supported as long as shipping disruption persists.

Goldman Sachs believes Brent could reach $120 a barrel by the fourth quarter if the conflict continues to escalate.

However, its base-case forecast remains $80 a barrel, assuming the conflict is eventually resolved.

Oil Forecast – Technical Analysis

Oil has recovered sharply from the $67 low, breaking above several important resistance levels, including the 50-day EMA, the 200-day EMA, the falling trendline and the 50% Fibonacci retracement of the $55–$120 move.

The RSI continues to point to further upside while remaining below overbought territory.

Buyers will look for a move towards $95, the 38.2% Fibonacci retracement, before attention turns to the $100 psychological level.

On the downside, initial support can be seen at $88, the 50% Fibonacci retracement.

Below there, trendline support comes in around $83.50, alongside the 50-day EMA at $82.20.

Further support is located at $80, the 61.8% Fibonacci retracement, followed by the 200-day SMA around $78.