EUR/JPY – Recovery from 20-day low continues…

Recovery in EUR/JPY pair from the 20-day low of 113.12 set in motion yesterday continues in Asia largely due to strengthening of the offered tone around JPY.

Euro side of the story has little to offer since traders remains on the sidelines ahead of the all important European Central Bank rate decision.

Focus on ECB

The bank is not seen tweaking its policy today; however, markets would be interested to hear directly from horse’s mouth regarding the possible timing of the QE taper. Earlier this month, Blomberg presented an article which said ECB, if and when it intends to end its QE program, would do so via ‘Taper’.

Markets misread the article and thus speculation caught fire that bank is planning to end its QE program. Euro could feel the heat if Draghi or ECB policy statement talks about QE taper. On the other hand, the common currency could perk up if Draghi reiterates willingness to run the program for a prolonged period of time.

EUR/JPY Technical Levels

The currency pair was last seen trading around 113.70. A break above 114.10 (confluence of 50-DMA and 38.2% of Brexit day high-low) would open doors for 114.40 (10-DMA) and 115.07 (100-DMA). On the downside, breach of 113.12 (previous day’s low) could yield a test of 112.22 (23.6% of Brexit day high-low). A violation there would open doors for a massive sell-off to 110.00 levels since the level has acted as a strong support on multiple occasions over the last two months.