The EUR/JPY cross faded ECB decision-led knee-jerk bullish spike to the 124.00 handle and drifted back into negative territory.
Spot ran through fresh offers at higher levels and quickly reversed over 50-points in response to a dovish tone from today’s ECB monetary policy decision. The central bank slashed its inflation forecasts through 2019 but upgraded its projections for regions economic growth.
Despite of the sharp retracement, the cross held within its daily trading range and seems to have some support from the ECB President Mario Draghi’s upbeat assessment of the region’s faster-than-expected growth.
Against the backdrop of change in the central bank’s monetary policy statement, removing the phrase that rates could go lower in the future, market participants seemed disappointed in absence of any clear guidance over the timing of policy normalization, which was eventually seen weighing on the common currency.
Meanwhile, fading demand for traditional safe-haven assets, in wake of the prevalent positive sentiment around equity markets, was seen weighing on the Japanese Yen and also collaborated towards limiting the downslide, at least for the time being.
Technical levels to watch
Bulls would be disheartened if the cross fails to defend the 123.00 handle, below which a fresh bout of selling pressure is likely to accelerate the slide towards 122.55 support before the downslide get extended even below the 122.00 handle towards testing 50-day SMA support near mid-121.00s.
Meanwhile, bullish momentum back above 123.65-70 area might continue to face some fresh supply near the 124.00 handle, which if conquered might trigger a short-covering bounce back towards 124.45-50 intermediate resistance en-route 124.85-90 hurdle.