- Bears showing their hand on ECB announcements considered dovish by the market.
- To reassert upside pressure the market will need to overcome the 130.15 7th November high.
EUR/JPY is currently trading at 129.03 and travelled between a tight range of between 129.26 and a low of 128.71 following a mundane European and US session on Thursday, leading into what could be a quiet end to the week in Asian markets in the run out to the last business weeks of the year.
EUR/JPY started out the European session sideways, albeit topped out at 129.26 as the pair drifted lower towards the ECB announcement. The pair dropped to 128.71 due to the euro’s decline following a rather dovish tone from the central bank. EUR/USD fell from 1.1390 to 1.1330 before retraceing back to 1.1365.
Dovish tone from ECB
- ECB’s QE is dead, long live QE!
Analysts at Westpac explained that the ECB’s policy meeting statement, press conference, and influential end-year staff projections were broadly as markets expected, though with a mild underlying dovish slant:
“As expected, policy rates were unchanged (refinancing rate 0.0%, deposit rate -0.4%) and the end of the ECB asset purchasing program (printing money to buy bonds) was confirmed.
Maintaining the pledge to keep interest rates steady “at their present levels at least through the summer of 2019″ may have surprised market expectations for the date to be extended, but the clear intention to continue reinvesting maturing bonds beyond any initial rate hikes offset that. Within the projections, the headline moves were mostly “in the market” but the lower path of core inflation and low GDP for 2021 (1.5%) provided the dovish slant. Moreover, President Draghi in the press conference said downside risks were growing.”
EUR/JPY levels
Analysts at Commerzbank noted that EUR/JPY continues to recover from the 4 month support line at 127.77 and they look for further gains:
“Initial resistances are the 55- and 200-day moving averages at 129.10/73. To reassert upside pressure the market will need to overcome the 130.15 7th November high. This will target 131.98 17th July high then the 133.12/13 highs from September.”
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