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EUR/JPY tests resistance as ECB offers no surprises

Fawad Razaqzada Fawad Razaqzada 22/07/2021
EUR/JPY tests resistance as ECB offers no surprises EUR/JPY tests resistance as ECB offers no surprises
EUR/JPY tests resistance as ECB offers no surprises Fawad Razaqzada
  • ECB may have changed style but delivers no surprises
  • US jobless claims data disappoint
  • EUR/USD climbs to 1.18 but will it hold?
  • Gold stuck between a rock and a hard place
  • EUR/JPY chart to watch
 
In reaction to the European Central Bank’s policy decision today, the EUR/USD rose initially then sold off, before bouncing back to rise above 1.18 as Christine Lagarde, the ECB President, starting speaking. European stock indices eased off their best levels after recovering nicely this week. Gold huffed and puffed but remained inside its recent ranges.  

ECB’s Lagarde dovish

She was characteristically dovish, saying things such as “no one wants to tighten prematurely” and that the Delta variant could dampen recovery in services, while bottlenecks are likely to dampen manufacturing in the short term. However, she countered that by saying that risks to the eurozone outlook is broadly balance. Still, policy will not be changed until CPI at 2% well ahead and during the projected horizon, which could mean 2-3 years.
Overall, the single currency remains fundamentally bearish, especially against currencies where the central bank is comparatively more hawkish. Today’s policy announcement may have been slightly different style from the ECB, but essentially there was nothing new to get excited over, with the central bank committing to nothing and delivering no surprises.
 
Gold stuck between a rock and a hard place

Gold investors found little reason to push the buy or sell buttons post ECB. Gold prices remain stuck between a rock and a hard place. The recent drop in yields should have supported the metal had it not been for a stronger dollar. Whenever yields have bounced back, this has been countered by a slightly weaker dollar index, keeping gold investors guessing as to which force is the stronger of the two.

EUR/USD climbs to 1.18 but will it hold?

As there was nothing significantly new from the ECB, the euro bears had no reason to push down the accelerator. Short-covering sent the euro to above 1.18 handles, with prices also boosted by data showing US jobless claims rose sharply last week by 419K,  climbing well above 350K expected.
 
EUR/JPY chart to watch

Given the potential for risk appetite to turn sour amid rising delta cases and valuations concerns etc hurting stocks, the safe-haven Japanese yen could find support. If so, it would be best played against currencies where the central bank is uber dovish such as the euro. In fact, the EUR/JPY may be about to turn lower, as rates test THIS key resistance area around 130.10, where the bearish trend meets old support area:

eurjpy
Source: ThinkMarkets and TradingView.com

Macro data and earnings highlights for Friday:
 

  • Retail sales from UK and Canada
  • Global flash manufacturing and services PMIs, including from Eurozone
  • Earnings: Honeywell International (US) and Vodafone (UK)
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Meet our contributors
Fawad Razaqzada
×
Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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