EUR/JPY Bullish Engulfing Pattern – ECB Plays Well
Arslan Butt • 1 min read
Fellas, if you recall, the single currency Euro was consistently getting weaker ahead of ECB monetary policy decision. Investors were pricing in dovish policy sentiments from the ECB. On Thursday, the European Central Bank revealed fresh stimulus steps to support the Eurozone, including chopping a key interest rate.
The deposit rate, which is mostly paid by banks on reserves with the ECB, was already in the negative zone. But now, the ECB has depended on the deposit rate from -0.4% to -0.5%.
The ECB also announced it was reinstating the (QE) quantitative easing program. It will buy €20bn of debt a month from 1 November. Consequently, we saw a sharp drop in the single currency Euro.
Since most of the dovish ECB policy was already priced in, EUR/USD and EUR/JPY reversed the very next moment. It’s called buy the rumor, sell the fact.
For the moment, EUR/JPY is trading around 119.860 and it’s very likely to find the next resistance at 120.275. We can see a bullish crossover on the 20 and 50 period EMA at 118 level. This signifies bullish sentiment of investors.
The RSI and Stochastics are holding in the overbought zone, suggesting chances of a bearish reversal.
EUR/JPY – Technical Levels
Pivot Point 118.63
EUR/JPY – Trade Idea
On Friday, EUR/JPY can stay bearish below 120.250 and bullish above 119 today. I’m not taking any position right now as it’s in the middle of nowhere and we may end up stuck at a peak.