EUR/JPY recovers ahead of ECB meeting

EUR/JPY bounced sharply on Wednesday, the day before the European Central Bank meeting. The pair bottomed during the European session at 122.62 (2-week low) and then rebounded. From the lows, it climbed a hundred pips. Recently it reached a fresh daily high at 123.70, boosted by a rally in the USD/JPY pair after the release of the statement from former FBI Director Comey. 

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The euro is rising against the yen after falling during the previous three trading days. Thursday is a key day for markets. The election in the United Kingdom represents a risk event that could affect insensible the EUR/JPY pair, through EUR/GBP and USD/JPY. 

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Also tomorrow the ECB will announce its decision on monetary policy. Media reports on Wednesday about staff macroeconomic projection weakened the euro first but then a new round of wires, pushed the euro to the upside. No change in rates is expected. Trades will focus mostly on Mario Draghi’s press conference (12:30 GMT). 

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Technical outlook 

“Daily basis, the pair has posted a lower high and a lower low, maintaining the risk towards the downside, despite the index remains stuck around 123.20, the 23.6% retracement of the latest bullish run”, said Valeria Bednarik, Chief Analyst at FXStreet. 

In the short term, according to her, the 4-hour chart shows risk tilted towards the downside, as the price remained contained below its 100 and 200-day moving averages “whilst technical indicators have lost upward strength within bearish territory, and after barely correcting oversold readings.”