1211 Waiting for ECB to confirm a long term direction

Hello traders,

Whether the European Central Bank (ECB) will cut interest rates by 50 basis points depends on several factors, including current economic data, inflation outlook, market expectations, and policymakers' concerns about economic growth and financial stability.

1. Market Expectations and Current Economic Background
- According to LSEG Refinitiv data, the market expects an 81% probability of a 25 basis point rate cut, while the expectation for a 50 basis point cut is only 19%. This indicates that the market generally believes the ECB is more inclined towards a moderate rate cut rather than taking more aggressive measures.
- The main challenges facing the European economy currently include slowing economic growth, easing inflation pressures, and fluctuations in energy prices. These factors may prompt the ECB to take action to support economic recovery, but a 50 basis point cut may be seen as too aggressive, especially when inflation has not fully returned to target.

2. Possibility of a 50 Basis Point Cut
If the ECB chooses to cut rates by 50 basis points, it would be a bold move that exceeds market expectations, potentially indicating the following:
- The ECB's concerns about economic growth are greater than the general market perception, suggesting a need for more substantial easing measures to stimulate the economy.
- By implementing a larger rate cut, the ECB may be trying to send a strong signal to the market, demonstrating its commitment to supporting the economy.
- However, such a move could also provoke negative market reactions, such as increased volatility in bond yields or further pressure on the euro exchange rate.

3. More Likely Scenario: A 25 Basis Point Cut
- Historically, the ECB tends to adjust its policies gradually to avoid causing excessive disruption to the market.
- A 25 basis point cut aligns with market expectations and can smoothly convey policy intentions while retaining flexibility for future adjustments.

4. **My View**
- The likelihood of a 25 basis point cut is significantly higher, as it aligns with market expectations and avoids unnecessary volatility in financial markets.
- If the ECB opts for a 50 basis point cut, it may indicate a more pessimistic assessment of recession risks, but this choice could also entail greater policy risks.

Technically, EURUSD is testing the weekly support and moving beneath the EMAs.
As long as it breaking through the support, a long-term bearish trend for EURUSD is pretty sure!

GOOD LUCK!
LESS IS MORE!