The European Central Bank (ECB) is meeting tomorrow in what will be remembered as Mario Draghi’s final meeting as ECB governor. All market analysts expect ECB to leave all policies unchanged at this juncture. EURJPY is one of the pairs that traditionally records strong reactions on any potential surprise from the ECB and Draghi himself.
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The ING expects that Draghi confirms the economic assessment as there is a very few reasons for changes the latest macro assessment.
“The ECB will very likely confirm the view of a longer-than-expected economic slowdown with no signs of a bottoming out of the manufacturing slump but tentative signs of contagion to the domestic economy,” it is noted in the ING report.
More importantly, Draghi is expected to provide no hints at any feature measures. In case he does, watch out for volatile moves in all EUR majors and crosses.
EURJPY is well-positioned to rally in case Draghi comes out hawkish. The pair has already created two clear higher highs which point out that EURJPY is trading in a modestly bullish environment. The bulls will first target the 161.8% Fibonacci extension of the latest push lower at 121.83. Besides the key extension, the 200 DMA sits just 40 pips higher at 122.22.
Moreover, the ascending trend line connecting January and June lows is trending around the 122.50 handle. On the downside, the 100 DMA (119.77) and the previous swing high that acted as a strong resistance (120.00) create a very strong supporting platform for the bulls. In case Draghi comes out dovish, this support should be enough to cover for the bulls.