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All signs seem to be pointing to a price reduction for the 360. Right now, MS doesn't have any overwhelming stimulus to increase hardware sales and current sales figures have been reflecting this. E3 announcements won't change that since everyone will have big announcements to unload.

Since Sony is committed to work on profitability, this is a key opportunity for MS to press its price advantage. They should ditch the 20GB altogether, which they may already be doing if the alleged 60GB SKU is a replacement rather than a 5th SKU. Clear out current 20GB stock at $299. Drop the price of the 120GB SKU to $400, or go as low as $350 if they really want to price aggressively.