EUR/JPY sees massive 150-pips volatile trading on ECB

• EUR/JPY sees wild swings as Lagarde fails to impress.
• ECB hikes key rates by 50 bps and announces a new anti-fragmentation tool.
• BOJ sticks to its ultra-loose monetary policy guidance.

EUR/JPY is looking to stabilize around 141.00 after the sharp 150-pips volatile trading witnessed in the last hour, thanks to the ECB policy announcements.

The cross broke its intraday trading range to the upside and jumped sharply to hit the highest level in two weeks at 142.32 after the ECB hiked the key interest rates by 50 bps while announcing its Transmission Protection Instrument (TPI), a new bond purchase scheme aimed at helping more indebted eurozone countries and preventing financial fragmentation within the currency bloc.

The optimism on a more hawkish than expected ECB quickly vapored out after the central bank revealed the forward guidance, noting the meeting-by-meeting approach, as the next rate hike path remains data-dependent.

Also, the lack of specifics on the new anti-fragmentation tool and doubts about its ability to protect the member countries weighed heavily on the euro. This took the wind out of the EUR/JPY impressive rally.

On the JPY side of the story, EUR/JPY continues to find support from the BOJ’s dovish rhetoric, as it stuck to its ultra-loose monetary policy stance. The BOJ stood pat on its monetary policy settings while leaving the policy guidance unchanged. BOJ Governor Haruhiko Kuroda, however, did acknowledge the negative effects of the rapid weakening of the yen in his post-policy meeting press conference.

With the ECB and BOJ policy decisions out of the way, investors now look forward to the sentiment on Wall Street for fresh trading impetus. US earnings season is underway and could have a significant impact on risk sentiment.

EUR/JPY technical levels