The EURJPY has rebounded all the way back up to a high of 122.30 after marking a new 8-year low of 110.69. Then again, it appears that the pair has encountered some resistance at the former support around 122.31. With stochastics in the overbought area, the pair could drift lower oncemore. If risk aversion resumes, the EURUSD could fall to 115.00 or back to its 8-year low. On the flip side, it could rise all the way to 125.00 if it’s able to move past 122.31.
The recent €750 billion ($962 billion) aid package by the EU-member nations and the IMF has temporarily given the market some confidence, causing the non-dollar currencies, particularly the euro to rebound after last week’s sharp drop. The euro, though, could experience some volatility given the ECB President Jean-Claude Trichet’s speech at the conclusion of the BIS meeting, in Basel later. The ECB recently announced that it would purchase the sovereign debt of any debt-stricken country within the euro zone. Remember that such action goes against the ECB’s self-imposed rules of discipline. Hence, any detail on how the central bank would go about it would likely shift the euro in either direction. The bias, however, remains on the downside given the bank’s dilemma.