EUR/JPY's drop on the ECB delaying easing was reversed after the EUR/USD failed to break below crucial 1.1100 barrier support, triggering a wild short-covering rebound.
That bounce was aided by ECB president Draghi saying a rate cut wasn't even discussed at today's meeting.
Roughly half the market had been expecting a 10bp rate cut today nL8N24Q2DJ, but it seems from Draghi's comments that they want to see what the Fed does next week and how future EZ economic data and trade talks develop before deciding on easing nECBJULY19 nECBJULY3.
Ten-year Bund yields failed to get much below July's previous record negative level.
But after recessionary PMI nL8N24P274 and IFO nL8N24Q2ZN releases, the ECB's hesitance should increase the need for the ECB to return to QE nECBJULY19. That doesn't bode well for durability of any rebound in EZ yields, EUR or EUR/JPY.
Because JGB yields are relatively immobile due to BOJ yield curve control and limited rate cut expectations, today's EUR/JPY bounce from below the 76.4% retracement of the post-flash-crash recovery at 120.12 may present a better selling opportunity if EUR/USD's rebound runs out of gas by recent range lows by 1.1200.
There's also the risk the ECB's behind the easing curve with QE expansion its last real option.
Chart: Click here