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The euro failed to garner buying interest for a second consecutive day against the U.S. dollar ahead of the much anticipated European Central Bank's monetary policy announcement.

Overall, market expectations on a rate change today are fairly low, thus leaving the responsibility to cheer up the semi-comatose euro to no other than ECB President Mario Draghi, who will be taking the stage to make his usual remarks on the post-meeting press conference. EUR/USD is currently quoted at 1.3045, with levels of volatility logically depressed.

There has been some talk over the possibility of a rate cut, which seems to be not fully discarded by some bank analysts. The general consensus is well reflected by Steve Ruffley, Owner of Tradermaker.com, who said:

Although the ECB continue to hint at further reductions in the key interest rate, they know as well as everyone else in the market that we can't carry on with such low interest rates for ever. Inflation in Europe is above target both the CPI and PPI figures continue to indicate that inflation is far from being under control.

Clemente De Lucia, Economist at BNP Paribas, offers a second view:

The success of the OMT has reduced the need of an interest rate cut. The ECB Governing Council seems in a wait-and-see mood. Our call, therefore, is for a status quo at next week ECB meeting. However, should the economic environment deteriorate significantly, the ECB might decide to cut the refi rate by another 25bp, easing funding conditions for banks that are having trouble raising market funds.

If history is any indication, investors should be reminded that the last time Draghi came on stage, the euro sold-off quite aggressively. As Kathy Lien, co-founder at BKAsset Management, notes:

At the time, interest rates were left unchanged at 0.75% but the euro sold off because the ECB downgraded its 2012 and 2013 growth and inflation forecasts and on top of that had a 'wide discussion' about interest rates (including negative rates).

Technically, Valeria Bednarik, chief analyst at FXstreet.com, observes:

Despite the lack of follow through the downside continues to be exposed in the short term, as long as price holds below 1.3110, 38.2% retracement of the same rally.

Chief Currency Strategist at Scotiabank, Camilla Sutton, sees some downside potential, and argues:

In this environment the pressure on the ECB to cut rates to 0.5% is mounting. We do not expect an interest rate cut tomorrow… however we do expect President Draghi's tone to be notably dovish and for the press conference's Q&A to focus on the OMT, the potential for negative interest rates and the state of the European economy. This discussion is most likely to drive EUR weakness.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Can The ECB Bring Clarity To The EUR/USD?