The ECB is expected to deliver a strong stimulatory package with a 10-20 basis point cut.

EUR/AUD has been sent down to critical support ahead of the European Central Bank tonight, and its make or break time for the cross depending on the outcome of this highly anticipated meeting.

The ECB is expected to deliver a strong stimulatory package with a 10-20 basis point cut. Quantitative Easing to the tune of 30 to 50 billion euros per month for the next 9-12 months is expected, along with a tiered deposit rate and dovish forward guidance - That is a toxic cocktail for the euro, but the expectations are priced in which leaves little chance of fireworks should the ECB deliver against them. Implied volatility is around just 50 pips of a move in EUR/USD one way or the other.

As for the Aussie, it continues to grind away, recovering from risk-off lows below the 0.67 handle vs the Dollar and has completed a 50% mean reversion of the late July to August aforementioned lows. Trade war sentiment is cooled down since the recent announcements that talks were going to commence again and we have been drip-fed updates here and there that are, so far, all positive and supportive for risk asset classes of which AUD is benefiting from. However, the pessimists are doubtful that this will be anything but just a temporary cease-fire in a long economic war and Nomura and Barclays both have China growing somewhere between 5% and 5.5% in 2020 which is going to be problematic for the rest of world growth, especially Australia.

The cross is meeting a critical support area made up of the 200-daily moving average, trendline support and a 50% mean reversion of the November July upside range. Should the ECB outperform the expectations, the euro will surely be out of favour and the next immediate downside target is located at prior support and resistance that meets the 61.8% Fibonacci retracement of the aforementioned rang found at 1.5890. Thereafter bears can aim for the 78.6% fibo' retracement in the 1.5650s. However, should the ECB underdeliver against expectations the cross can move back within the rising channel to target the 21 and 50-daily moving average that meets the 38.2% Fibo' of the aforementioned range located in the 1.6240s guarding a run to the May spike highs and the 23.6% Fibo located at 1.6450.

EURAUD it is also on inflection point - on 200 DMA and long term trendline support as well as having completed a 50% mean reversion.

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