ECB Day

A more cautious tone to Wednesday's trading session supported the greenback and weighed on EUR/USD, allowing the rate to extend further away from well-defined technical resistance that was tested post-NFPs. That was before a tight round of Asia-Pac trade left the cross a little above its Wednesday lows, dealing little changed, just shy of $1.1815 into London hours.

• To recap, Wednesday also saw some comments from ECB governing council members Holzmann and Vasle. The former was typically hawkish, noting that the ECB may be able to normalise policy sooner than was thought owing to potential upside inflation risks. Meanwhile, Vasle underscored the continued need for highly accommodative monetary policy.
• The ECB monetary policy decision headlines the broader docket today. Easing financial conditions since the July meeting, coupled with an improvement in economic conditions and an acceleration in inflation, suggest that the ECB is likely to announce a reduction in the PEPP purchase rate. A more fundamental decision on the future of PEPP is likely to be postponed until December, given that the Governing Council will require greater conviction that the Covid crisis is over before considering wrapping up the emergency support measures. Click for our full preview.
• Initial support is located at the Sep 1 low ($1.1794), with any break there exposing the Aug 27 low ($1.1735). The Aug 20 low & bear trigger is located a little further below ($1.1664). Initial resistance comes in at the Jul 30/Sep 3 high ($1.1909), which forms key resistance.
• Notable FX option expiries to be aware of come today's 10AM NY cut include: $1.1750 (EUR1.0bn), $1.1800-10 (EUR988mn), $1.1870-80 (EUR1.4bn), $1.1895-05 (EUR1.0bn).