A few hours ago, the European Central Bank’s Presiden Mario Draghi shook the market with an additional policy easing sentiment. European Central Bank (ECB) President Mario Draghi attempted to convince market players about the bank’s capacity to perform amid growing uncertainties on the real influence of monetary policy if a fresh recession were to develop.
ECB Draghi’s Key Points
- European Central Bank (ECB) President Mario Draghi protected the devices that the institution has available on Tuesday, announcing that it could cut interest rates again or present further asset purchases if inflation doesn’t reach its target.
- Talking at the ECB Forum in Sintra, Portugal, Draghi delivered a defiantly dovish tone, declaring that if the economic situation worsens in the upcoming months, the bank would announce further stimulus.
- In response to this, the single currency Euro sank 0.2% versus the dollar in a matter of minutes as Draghi presented the remarks.
- The German 10-year bond yield hit -0.30% for the first time ever and the U.S. 10-year Treasury yield went its weakest since September 2017 at 2.0475%
- At the Beginning this month, the ECB reviewed its interest rate expectations, adding that its first-post crisis rate hike is unlikely to come before mid-2020.
- At the Beginning this month, the ECB amended its interest rate forecast, figuring that its first-post crisis rate hike is unlikely to come before mid-2020. This dovish stance shows that the central bank is skeptical about economic recovery in the 19-member region.
- The ECB also presented new economic forecasts earlier this month, with lower growth and inflation projections for 2020, but marginally higher for this year.
How Has This Impacted Euro?
Fellow, the dovish monetary policy is considered suitable for any currency. Euro is getting weaker, and the investor’s focus stays on the dollar and other high yielding currency pairs.
Multi Months Drop in the EUR/JPY
EUR/JPY has experienced a massive drop after the release of more than expected dovish remarks. With that, the Japanese cross came under pressure and crossed below 122 trading level. The technical outlook is suggesting further bearish bias after the European central bank unlocked the opportunities for further rate cuts and declared that negative rates have proven to be an essential tool. The pair has recently broken below 121.450 support area. This opens further room for selling until 120.800.
The immediate candle is strongly bearish, in fact, it’s bearish engulfing candle, suggesting a strong bearish trend in EUR/JPY.
Key Trading Level: 122.16
Consider staying bearish below 122 as the market is also likely to test 120.860. It would be beautiful to go long above 120.800. While selling is preferred below 121.650. Good luck! All the best!