Talking Points:

- EURUSD range to watch: 1.3585-1.3645.

- EURJPY needs to clear 139.95 before longs can truly reengage.

- USDCHF might be best longer-term opportunity if ECB delivers.

The day of the much-ballyhooed European Central Bank meeting has arrived, one for which market participants have honed in for the past month ever since ECB President Mario Draghi precommitted to a policy shift.

Indeed, with traders focused on the idea that the Governing Council felt "comfortable" with acting in June, the past month has been nothing short of theory being put to practice: a major central bank is threatening to loosen policy further, and in the interim, its currency has depreciated while bonds and equities have both rallied.

Whereas market participants were previously complacent and really not doing much of anything, there are signs that a big move could be around the corner. 1M EURUSD vol eclipsed its 200-DMA for only the second time this year yesterday, and 1W EURUSD implied vol reached its highest level since August 2013. Traders are nervous, but as you can easily see by the EURUSD's tight 60-pip range the past week, no one is ready to commit to a move in either direction just yet.

The ECB's options are wide-ranging and plentiful, beyond the standard refinancing rate cut: a deposit rate cut into negative territory to try and spur lending (would impact around €100B; enhanced forward guidance with promise for future action; and liquidity measures aimed at helping small- and medium-sized enterprises (similar to the Bank of England's FLS).

See the video above for details on trade setups in EURUSD, EURJPY, and USDCHF (a proxy trade). I'll be talking about all of these potential policy changes and their impact on the Euro and other currencies today for live coverage of the ECB rate decision, starting at 11:30 GMT in the DailyFX Live Trading Room.

Read more: GBP/USD Hammers as MACD Cross Develops, GBP/JPY Tests Range Top

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Trading Center