EUR/JPY plunges to 116.50 on BOJ comments, now eyeing ECB rate decision

The EUR/JPY cross reversed sharply from 4-week highs and plunged below 117.00 handle to currently trade near session low, around 116.50 region.

A sudden turnaround was triggered after BOJ Governor rejected the possibility for helicopter money but showed central bank's readiness to add stimulus in order to combat deflationary pressure.

A sharp bout of Yen short-covering across the board has led to some risk-off trade that further aggravated the fall in the EUR/JPY cross.

Going forward, ECB monetary policy decision and subsequent press conference would be the next big event risk that would be closely watch by market participants in order to determine near-term direction for the pair.

Technical levels to watch

From current levels, weakness below 116.50 is likely to get extended towards 116.00-115.80 strong support, which if broken would negate prospects of any near-term recovery and could turn the pair vulnerable to drop back below 115.00 psychological mark towards testing its previous strong resistance, now turned support, near 114.50 region.

On the flip side, recovery momentum back above 117.00 handle now seems to confront strong resistance near 117.65-70 region. Only a decisive move above this important resistance would now pave way for further near-term appreciating move for the pair.