|

EUR/JPY flirting with lows, nearing 131.00 mark ahead of ECB

   •  Traders seemed inclined to lighten their bullish EUR bets.
   •  ECB decision/updated economic projections to set the tone.
   •  Technically seems vulnerable to extend downward trajectory.

The EUR/JPY cross maintained it’s offered tone through the mid-European session and is currently placed at session lows, around the 131.30-25 region.

The shared currency lost some ground on Thursday as traders seemed inclined to lighten their bullish positions heading into today's key event risk - the ECB monetary policy decision. The European Central Bank is universally expected to leave interest rates unchanged and hence, the key focus would be on the updated economic projections. 

Also in focus, commentary on the QE program, expiring in September, and the ECB President Mario Draghi's comments during the post-meeting press-conference should infuse a fresh bout of volatility and provide some meaningful momentum. 

Meanwhile, the prevalent cautious sentiment around European equity markets was seen lending some support to the Japanese Yen's safe-haven demand and further collaborated to the pair's downfall on Thursday. 

From a technical perspective, the pair's inability to build on its recovery move back above the very important 200-day SMA clearly suggests that the recent up-move could be more of a corrective in nature and the downward trajectory might still be far from over. Hence, today price action would set the tone for the next leg of directional move in the near-term. 

Technical levels to watch

A follow-through weakness below the 131.00 handle has the potential to continue dragging the cross further towards 130.25-20 support area en-route the key 130.00 psychological mark.

On the upside, 131.75 area, closely followed by the 132.00 handle, might continue to act as an immediate resistance, above which a bout of short-covering could lift the cross further towards the 133.00 round figure mark.
 

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

More from Haresh Menghani
Share:

Editor's Picks

AUD/USD holds above 0.6950 as bullish USD caps gains

AUD/USD edges lower during the Asian session on Tuesday, stalling a two-day recovery move from a two-month low, touched last week. An extended rout in the fixed income market keeps US bond yields elevated near multi-year highs. This, along with geopolitical uncertainties, helps the US Dollar retain its bullish tone despite receding October Fed hike bets. However, expectations for another RBA rate hike this month could act as a tailwind for the Aussie.

USD/JPY rises back above 158.00 despite hawkish BoJ outlook

USD/JPY rises back above 158.00 in the early European morning on Tuesday. The pair strengthens as the Japanese Yen fails to find any inspiration from hawkish BoJ expectations and looming intervention risks. Meanwhile, geopolitical uncertainty and elevated US bond yields keep the US Dollar near its YTD high despite receding October Fed hike bets. This, in turn, helps the pair stay supported.

Gold rebounds from two-month lows as US Dollar, Treasury yields retreat

Gold (XAU/USD) rebounds on Tuesday as a pullback in US Treasury yields weighs on the US Dollar (USD), helping the metal recover after falling to a two-month low of $4,104 during Asian trading hours. At the time of writing, XAU/USD trades around $4,173, up 0.82% on the day.

Ripple and Stellar weaken as derivatives positioning fades
Ripple (XRP) and Stellar (XLM) face pressure trading below $1.499 and $0.220, respectively, on Tuesday after a modest correction at the start of the week. Traders should be cautious as weakening derivatives metrics and fading bullish momentum suggest further corrections for XRP and XLM. Derivatives data shows a weakening and cautious signal among traders.
Europe in focus as French and Spanish politics drive sentiment

There are no tier-1 releases today. Focus will remain on developments in the European markets and geopolitical developments in the Middle East. In France, the key issue in the coming days will be whether the Socialists and Marine Le Pen's National Rally signal they are willing to topple the government over the budget.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.