EUR/JPY weakens below mid-116.00s, back closer to 6-month lows ahead of ECB

• EUR/JPY remains heavily offered for the second straight session.
• The global flight to safety continues to underpin the Japanese yen.
• Recession fears in the Eurozone weighed on the shared currency.

The EUR/JPY cross continued losing ground through the mid-European session and is currently placed near the lower end of its daily trading range, just below mid-116.00s.

A combination of factors exerted some heavy downward pressure for the second consecutive session on Thursday and dragged the cross well within the striking distance of six-month lows set at the start of this week.

The World Health Organization on Wednesday declared the novel coronavirus a global pandemic, which was followed by the US President Donald Trump's announcement to suspend all travel from Europe for 30 days.

The latest developments sent the markets into a fresh tailspin and kicked off another wave of panic selling across the global equity markets on Thursday. This provided a goodish lift to the Japanese yen’s perceived safe-haven status.

Meanwhile, Italy intensified its lockdown on public life after the country recorded another steep rise in new infections, which fueled concerns that the Eurozone could face a deep recession in the near-term and weighed on the shared currency.

Against the backdrop of the ECB President Christine Lagarde's comments on Wednesday that Europe would see as scenarios that would remind us of the Great Financial Crisis, investors seemed to price in prospects of some aggressive moves by the ECB.

Hence, Thursday’s highly anticipated European Central Bank’s policy decision and the post-meeting press conference will play a key role in driving the sentiment surrounding the common currency and provide a fresh directional impetus.

Technical levels to watch