The EUR/USD pair continues to struggle in its attempts to capitalize on its recent rebound from the weekly low, as traders remain cautious ahead of today's much-anticipated European Central Bank (ECB) monetary policy meeting.

The ECB is expected to lower borrowing costs for the fifth consecutive meeting, given persistently low inflation and subdued economic growth in the eurozone. Moreover, markets have already priced in the possibility of three additional rate cuts before the end of the year, driven by concerns over the potential economic consequences of trade tariffs threatened by U.S. President Donald Trump. This weighs on the euro and limits the EUR/USD pair's upward potential.

Despite Trump's demands for lower interest rates, the Federal Reserve decided to maintain its current policy at the conclusion of its two-day meeting yesterday. The Fed made it clear that it will not rush to cut borrowing costs unless inflation and labor market data justify such a move. The hawkish stance of the Fed supports the U.S. dollar, further capping the EUR/USD pair's gains. However, declining U.S. Treasury yields are limiting the dollar's upside, keeping EUR/USD stable for now.

In addition to the ECB decision, traders should also focus on the U.S. Initial Jobless Claims report, which could impact the dollar's price action and provide some impetus for EUR/USD during the North American session. Nevertheless, the divergence in monetary policy expectations between the ECB and the Fed suggests that EUR/USD's path of least resistance remains downward. As a result, any recovery attempts could be seen as selling opportunities, with the risk of a sharp decline.

Technical Outlook for EUR/USD

Bullish Scenario

From a technical standpoint, the recent breakout above the short-term downward trend channel and the subsequent strengthening above the 50-day Simple Moving Average (SMA) have been key triggers for EUR/USD bulls. These developments, combined with a positive Relative Strength Index (RSI) on the daily chart, indicate a bullish bias.

However, a sustained move above the psychological level of 1.0500 is needed before considering further upside positions. If this level is breached, spot prices could target the immediate barrier at 1.0535, which is also this week's monthly high. A break above this level would set the stage for a rally toward the 1.0600 mark, a level not seen since early December.

Bearish Scenario

On the other hand, yesterday's low near 1.0380 will act as initial support against an immediate decline. Any further losses could be seen as a buying opportunity, which is likely to be limited around the trendline breakout point near 1.0330.