EUR/JPY flirting with lows, around 135.00 mark ahead of Draghi

   •  ECB leaves interest rates/QE unchanged at Jan. meeting.
   •  Stronger JPY exerting some downward pressure.
   •  Draghi’s speech eyed for fresh directional impetus.

The EUR/JPY cross held on to a mildly weaker tone for the third consecutive session and had a rather muted reaction to the ECB announcement.

The spot moved little and held near the lower end of its daily trading range after the ECB left all three key benchmark rates and the net asset purchases target (at €30 billion) unchanged. The decision was on expected lines and hence, did little to provide any fresh impetus. 

Moreover, investors preferred to remain on the sideline and wait for the post-meeting press conference, where the ECB President Mario Draghi's comments would be closely scrutinized to for clues over the future path of the monetary policy and eventually provide some fresh directional impetus for the shared currency.

Meanwhile, a strong bid tone around the Japanese Yen, further supported by reviving safe-haven demand, was seen exerting some downward pressure, with the cross now moving on the verge of breaking below the key 135.00 psychological mark.

Technical levels to watch

A convincing break through the 135.00 handle is likely to accelerate the fall towards the 134.30-25 horizontal support en-route the 134.00 round figure mark. On the flip side, any appreciating move might now confront fresh supply near mid-135.00s, above which a bout of short-covering could lift the cross back towards the 136.00 handle.