ECB In FocusAlong with US CPI, today’s ECB meeting will be the main event of the week. On the back of a surprisingly hawkish shift by Lagarde in January, the market will be closely watching today to see how much the crisis in Ukraine has affected the bank’s view. In light of recent developments, the market has grown cautiously hopeful that Russia and Ukraine can come to a ceasefire arrangement, with EUR benefitting from the improvement in risk tone.With this in mind, today’s meeting should see further support for EUR. While the ECB will no doubt emphasise its concern over the situation and the uncertainty within its outlook, its goal of policy normalisation will be delayed, not abandoned. If the ECB maintains an optimistic tone, this should keep EUR well bid. However, if Lagarde goes the other way and focuses mainly on downside risks from the crisis, this will likely weigh on EUR.Where to Trade The ECB Meeting?EURJPYThe recovery rally has seen price trading back up into a rest of the big resistance zone around 127.74 – 128.36. If today’s ECB meeting sees the bank focusing on downside risks, warning over the uncertainty in the outlook, EUR is likely to continue lower from here, with shorts on a break of 127.74 putting focus back on the 125.13 level. Alternatively, if the ECB strikes a more optimistic tone, we can look for a breakout above the 128.36 level targeting 129.59 initially.
Source: Tickmill
