FxWirePro: EUR/JPY rangebound in the Asian session, cautious sentiment prevails ahead of ECB policy meet

EUR/JPY chart - Trading View 

Spot Analysis:

EUR/JPY was trading 0.08% lower on the day at 129.94 at around 05:00 GMT.

Previous Week's High/ Low: 131.08/ 129.61

Previous Session's High/ Low: 130.18/ 129.15

Fundamental Overview:

Cautious sentiment prevails ahead of the European Central Bank (ECB) monetary policy meeting.

ECB policymakers’ economic outlook will be observed closely, as they’re more likely to keep the easy monetary policy.

Further, holiday on account of Marine Day off in Japan and a light calendar in Asia contribute to the sluggish momentum.

Market sentiment dwindles amid mixed clues concerning virus, likely to keep the pair depressed as safe-haven demand for yen remains intact.

Kyodo News reports showed that Tokyo recorded the highest covid figures since mid-January on Wednesday.

The Japanese government has tightened border controls and heightened checks as Olympics begin after a year’s delay. 

Technical Analysis:

- EUR/JPY price action has bounced off just above 200-DMA support

- The pair has edged above 5-DMA and Stochs are on verge of rollover from oversold levels

- MACD is well in the negative zone, but MACD line is on verge of bullish crossover on signal line

- The pair has formed a Dragonfly Doji on the weekly candle till date, raising scope for upside

Major Support and Resistance Levels:

Support - 129.64 (5-DMA), 128.80 (Lower BB), 128.41 (200-DMA)

Resistance - 130.47 (110-EMA), 130.59 (21-EMA), 131.18 (55-EMA)

Summary: EUR/JPY extends cautious trade ahead of ECB policy meeting. Rapid spread of the Delta covid variant and lower inflation paint a pessimistic view. 

After the dovish strategic review, the central bank is likely to strike a more dovish tone which could drag the pair lower. 

Pullback from multi-year highs just above 134 mark in June 2021 has held above 200-DMA which is major support at 128.41. Break below will open downside.