EURJPY Sinking Ahead of ECB

ECB Up NextThe ECB takes centre stage today as the bank meets for its March rate setting meeting. No change in monetary policy is expected today, however, traders will be carefully scrutinising the details of today’s meeting for clues as to when a first-rate cut can be expected. Currently, the market is pegging a June cut from the bank in line with weakening eurozone data and lower inflation.ECB PushbackThe bank has been consistent recently in warning that it will keep rates at elevated levels for as long as necessary to bring inflation back to target. The focus today will be on whether there is any softening in that message, suggesting increased risks of a near-term cut (bearish EUR), or whether the bank continues to downplay short-term rate cut risks (bullish EUR).Staff ProjectionsIn terms of gauging likely ECB action, the latest set of staff projections today will be very important. Should we see any downward revision to growth and inflation forecasts, this should bolster dovish expectations. In particular, if there is a downward shift in the inflation forecast (which currently projects CPI returning to target in Q3 2025) this should see traders bringing forward their easing expectations, weighing on EUR near-term.Language in FocusAlong with technical projections, traders will be looking for any subtle clues in the language of the meeting statement and post-meeting presser. If Lagarde notes that there have been any initial discussion regarding rate cuts, this would be viewed as a firmly bearish development for EUR.Technical ViewsEURJPYThe rally in EURJPY has stalled for now into the 164 level with price now reversing back under the 162.29 level. Price remains within the bull channel for now. However, with momentum studies dropping quickly, risks of a break lower are growing with 159.35 the next key support to note.