ECB Up Next

Following the September BOC meeting yesterday, focus today shifts to the ECB. The central bank is widely expected to hike rates by .75%, surpassing the .5% hike in July. With inflation in the eurozone having hit record highs of 9.1% in July, the pressure is on the ECB to act decisively. Given the aggressive tightening we’ve seen elsewhere, should the ECB hike by less than .75%, the reaction in EUR is likely to be firmly bearish.

Along with the rate decision itself, traders will also be paying close attention to the latest set of updates and forecasts from the bank. In particular, the latest inflation forecasts will be closely watched. Any upward revisions here will no doubt cement hawkish ECB expectations in the coming months, keeping EUR supported. Traders will be also be keen to see how the bank addresses recent FX weakness. Any mention of the bank monitoring the situation will likely be taken as a hawkish signal also. However, there are risks around the bank’s economic outlook given the growth concerns mounting on the horizon. If the ECB sounds overly concerns this will no doubt dampen any upside reaction in EUR today.

Where to Trade The ECB Today?

EURJPY

The pair has been moving sharply higher following the breakout above the corrective bear-channel/bull flag. With both MACD and RSI bullish here and with the retail market heavily short, there is plenty of room for the current rally to continue. Price is currently testing the YTD highs at 144.01. Bulls can look for a break of this level to target 149.83 longer-term.