EUR/JPY flirting with 122.00 handle just ahead of ECB decision

As Yen continues to surge on global risk aversion, a minor up-tick in the EUR/USD major is doing little to assist the EUR/JPY cross that continues to flirt with 122.00 handle just ahead of the ECB decision.

Although no major policy action is expected from today's ECB announcement but what will be of key interest for market participants would be the central bank's inflation projections. Even a minor upward adjustment could provide a strong boost for the Euro bulls.

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The EUR/JPY cross, however, is being dominated by bears, responding to Japan's decision to delay the sale-tax increase, and is now on the verge of decisively breaking below 122.00 handle. Weakness below 122.00 level would mark a break below the pair's four-week trading range and thus might trigger resumption of the pair's prior downward trajectory.

Technical levels to watch

On a sustained weakness below 122.00 level, the pair seems to immediate drops towards retesting multi-month lows support near 121.70-65 zone, earlier tested in April and May, which if broken now seems to open room for further depreciating move towards testing its next major support near 119.00 level in the near-term.

Meanwhile, any attempts of recovery might now face immediate resistance near 122.55-60 area, ahead of 123.00 round figure mark resistance (nearing 20-day SMA). Recovery back above 123.00 level would confirm the near-term range-bound trade, thus assisting the pair back towards retesting 124.00 handle.