European Central Bank is scheduled to announce its monetary policy decision at 1:15 pm BST today. Central bank is not expected to change level of rates today. While ECB has already delivered the first rate cut in a cycle at June meeting, central bankers strongly hinted that back-to-back rate cuts are unlikely. Economists surveyed by Reuters and Bloomberg expect rates to stay unchanged and money markets price in less than 5% chance of another rate cut today. However, pricing for September meeting indicates an over 80% chance of a 25 basis point rate cut from ECB. While ECB is unlikely to make a clear statement that the next rate cut will come at the next meeting, traders will look for hints in the statement and during ECB Lagarde press conference at 1:45 pm BST.
Taking a look at EURJPY chart at D1 interval, we can see that the pair has been pulling back recently. Pair pulled back from the upper limit of the upward channel and is now testing the lower limit in the 170.60 area. Pair broke below the 50-session moving average (green line) yesterday, and is continuing to move lower today. However, the first attempt to break below the channel failed and EURJPY bounced off the daily lows and recovered part of the losses. A surprise rate cut from ECB today would likely triggered a further drop on the pair with an almost certain break below the channel. However, such an outcome is rather unlikely. In fact, there is a very little scope for a surprise today given recent comments from ECB members and lack of new forecasts at today's meeting.
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Source: xStation5
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