European Central Bank. Image source: Jim Woodward, flickr.com
The struggling euro is currently attempting to recuperate from its recent losses following the February policy meeting of the European Central Bank. You can read more about the current struggles of the single currency from our last analysis of the EURUSD pair.
The Governing Council of the ECB expectedly decided to maintain the near-negative Main Refinancing Interest Rate unchanged at 0.00 per cent in February. This decision prompted a minor upsurge in bullish bias on the euro.
EURJPY 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the EURJPY is currently attempting a bullish breakout above the upper limit of the descending channel. The bullish momentum was renewed following the completion of a major 1-5 impulse wave pattern, as postulated by the Elliott Wave theory, just below the 61.8 per cent Fibonacci retracement level at 129.003.
If the breakout is successful, the upswing can then be carried higher towards the 38.2 per cent Fibonacci at 129.955, which is positioned just below the psychologically significant threshold at 130.000. Conversely, a reversal from the 38.2 per cent Fibonacci would probably entail another dropdown to the 61.8 per cent Fibonacci at 129.003 before the bullish sentiment can recover.
At any rate, the next major target for the new uptrend would likely be the 23.6 per cent Fibonacci at 130.609.
Despite rising inflation, ECB remains relatively dovish
Eurozone MoM Inflation Rate. Image source: TradingEconomics.com
"In the first quarter of 2022, the Governing Council is conducting net asset purchases under the PEPP at a lower pace than in the previous quarter. It will discontinue net asset purchases under the PEPP at the end of March 2022."
Unlike the Bank of England, which adopted a much more hawkish policy stance in a bid to curb soaring inflation, the ECB projected a relative restrain. This decision is predicated on the bumpy and uneven economic recovery in the Eurozone.
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