EUR/JPY steadies as ECB’s hold rates, traders eye Lagarde’s presser

• EUR/JPY reaches 171.00, peaking at 171.19, after the ECB holds interest rates steady.
• ECB remarks on core inflation: slight increase due to one-off factors, though most metrics stable or decreased in June.
• ECB plans to reduce APP and PEPP portfolios, ceasing principal reinvestments, with an average monthly reduction of €7.5 billion.

The EUR/JPY remains at familiar levels after the European Central Bank decided to keep interest rates unchanged, with its deposit rate at 3.75% as expected, and would stick to its meeting-by-meeting approach, failing to provide an interest rate path. At the time of writing, the cross trades at around 171.00 after hitting a daily high of 171.19.

ECB maintains cautious stance, fails to outline clear rate path

In its monetary policy statement, the ECB mentioned that measures of core inflation edged slightly up due to “one-off factors,” but most measures remained stable or edged down in June. The ECB’s Governing Council noted that the policy “is keeping financing conditions restrictive.” It would keep it as it is “for as long as necessary” to ensure inflation returns to its 2% goal.

Regarding its Aset Purchase Program (APP), the ECB decided not to reinvest all the principal payments on its Asset Purchase Program (APP) and the Pandemic Emergency Purchase Program (PEPP), reducing the portfolio to average €7.5 billion per month.

In the meantime, traders eye ECB’s President Christine Lagarde's press conference at around 12:45 GMT.

EUR/JPY Price Analysis: Technical outlook

The EUR/JPY slid to its daily low of 170.01 during the Asian session, yet it has managed to recover some ground. After the ECB’s decision, it climbed back above the 50-day moving average (DMA)at 170.75.

Nevertheless, momentum remains on the sellers’ side, as the Relative Strength Index (RSI) shifted bearish following the Japanese authority's intervention in the FX space.

However, if EUR/JPY stays above 171.00, that could pave the way to test July’s 17 high of 172.83. On its way up, it would face key resistance levels: the Kijun-Sen at 171.47, followed by the Tenkan-Sen at 172.72. Afterward, buyers could test yesterday’s peak.

On the other hand, if a fall is below 171.00, sellers could challenge the 170.00 figure before prices drop inside the Ichimoku Cloud (Kumo).