Today we are feeling the quiet before the ECB monetary policy storm. Yesterday, the Canadian rate hike surprised the market, can we expect the same from the ECB today? If yes, this is what should we do.

As my colleague, Rowan elaborated the ECB Monetary Policy and potential actions along with a plan on EUR/USD in the Forex Signals Brief for September 7th. Let's take a look at crosses as well.

EUR/JPY – Fibonacci Levels In Action

Considering the technicals, I would love to sell the pair right away, but the ECB is forcing me to wait. On the 4- hour chart, the pair has already completed a 50% retracement at $129.550 and had a pullback to $130.250.

EURJPY – 4 Hour Chart – Fibonacci Retracement

At the moment, the pair is overbought enough to give us another wave of selling. To me, the CMP (current market price) $130.250 is a potential sell level as the pair has formed a double top here. The moving averages (50 – periods) is providing strong resistance at $130.300, signaling a selling sentiment.

EUR/JPY – Trading Plan

We need to wait until the release of ECB decision at 11:45 (GMT) & Press Conference at 12:30 (GMT).

Potential Scenario:

ECB Rate Hike: The least possible scenario is a rate hike. Let's say they hike the rate, we need to take an instant buy position at current market price ($130.300) to target nearly 100 pips $131.300.

Tapering QE: If the ECB announces to cut the Bond Buying Program, this will be a hawkish monetary policy and will strengthen the single currency Euro. Again, we need to take a buy position for 100 pips.

Unchanged Policy: In case of no change in policy, I will take a sell position below $130.300 to target $129.75 & $129.250. Good luck.