EURUSD Lower Ahead of ECB

ECB In FocusThe Euro is trading lower today ahead of the October ECB meeting in a few hours’ time. The market is widely expecting the bank to keep rates on hold though, on the back of recent stickiness in inflation, the bank is expected to retain a hawkish tone its guidance. Indeed, speaking in Greece last night, ECB chief Lagarde warned that the bank is not yet done in its fight against inflation and must be very attentive in monitoring risks. While Lagarde expressed confidence that the bank will bring inflation back down to its 2% target, risks such as rising oil prices and conflict in the Middle East present a challenge.Hawkish ECB Risks?In terms of expectations for today, the central bias is for a ‘hawkish hold’. The bank needs to reassure markets that it stands ready to do more on inflation and, with the latest staff projections due in December, the next meeting appears a more likely time for making a further policy adjustment. Given the recent downshift in the market’s ECB tightening expectations, in line with slowing eurozone economic performance, there is room today for an upside surprise in EUR if the ECB sounds more hawkish than traders expect.Technical ViewsEURUSDFollowing a laboured correction higher off the 1.0515 level, price has since failed and is now turning back down towards the level. With momentum studies turning lower, risks of a downside break are growing and if breached, the 1.0515 level opens the way for a deeper move down towards 1.0093 longer-term. To the topside, bulls need a break of 1.0785 to negate near-term bearishness.