EUR/JPY flirts with lows near 134.20 ahead of Draghi’s speech

• Weighted by risk-aversion/ pre-ECB caution trading
• Manages to stay above 134 handle

The EUR/JPY cross is seen consolidating near session lows of 134.16, as markets await the ECB decision for the next direction.

EUR/JPY: All eyes on ECB QE taper announcement

The cross looks poised for further downside, as the Euro may come under fresh selling pressure on the ECB decision, as the modification of the asset purchases amount and/or the timing is already priced-in by the markets. Hence, investors could adopt a ‘Sell the fact’ strategy on the announcement.

Even in the case, the ECB disappoints the hawks, the cross could witness fresh sell-off, which could knock-off the prices towards the next support zone located near 133.50 levels.

The weakness seen around EUR/JPY so far this session can be partly attributed to some strength seen in the safe-haven Yen, as investors refrain from placing bets on the risk assets ahead of the ECB meeting – the main risk event for today.

EUR/JPY Technical View

To the upside, resistances are aligned at 134.50 (multi-month tops), 135 (round number) and 135.44 (classic R3). The downside remains guarded by 133.98 (5-DMA), below which 133.50/45 (psychological levels/ 10-DMA) will be tested, opening doors for a test of 133.19/10 (Oct 24 & 23 low).