EUR/JPY refreshes weekly tops post-ECB, holds above mid-126.00s ahead of Lagarde’s speech

• EUR/JPY gained some positive traction after the ECB announced its latest policy decision.
• The ECB left key interest rates unchanged and increase the size of its PEPP by €500 billion.
• Selling bias around the safe-haven JPY remained supportive ahead of Lagarde’s speech.

The EUR/JPY cross rallied around 30 pips and shot to fresh weekly tops, around the 126.60 region in reaction to the latest ECB monetary policy decision.

As was expected, the European Central Bank left its benchmark interest rates unchanged at the end of December meeting and increased the size of its Pandemic Emergency Purchase Program (PEPP) by €500 billion. The ECB also extended the horizon for net purchases under the PEPP by 9-months to March 2022.

In the accompanying policy statement, the central bank offered no surprise and reiterated that the supportive measures will continue until it judges that the coronavirus crisis phase is over. Moreover, the fact that additional stimulus was already priced in, the announcement did little to provide any fresh impetus.

Meanwhile, a heavily offered tone surrounding the safe-haven Japanese yen – despite the prevalent cautious mood – remained supportive of the intraday move up for the EUR/JPY cross. Market participants now look forward to the ECB’s latest economic projections. This will be followed by the post-meeting press conference.

Apart from this, Investors will closely scrutinize comments by the ECB President Christine Lagarde, which might infuse a fresh bout of volatility and assist traders to grab some short-term opportunities around the EUR/JPY cross.

Technical levels to watch