Speculation is running rampant that the European Central Bank (ECB) might have a new solution sooner than expected to address its debt crisis.

Despite the dog the days of summer trading, the euro has rallied against the majority of its major trading partners since the middle of July.

ECB STAYS HOME
Today’s euro rally can attributed to a positive bond auction in Spain, but more importantly, European Central Bank President Mario Draghi decided to stay in Europe and work, instead of coming to the annual Jackson Hole symposium.

Speculation is growing that a potential solution might come at the September 6 ECB meeting or later in October.

THE TRADE
Euro/yen (EUR/JPY), as of Tuesday mid morning, is in a summer range between 98.00 and 99.00.

Since price action broke above the important bearish downtrend from the beginning of April till the last week of July, a potential bullish trend may be emerging. Also, since making a new decade low at 94.144, the pair has been steadily making both higher lows and highs.

KEY LEVEL
If price extends and rises above the 99.00 level, a new bullish trend might be confirmed. Immediate resistance lies at the psychological 100.00 level which coincides with out 100-day simple moving average. In the event that price reverses and breaks below our bearish (red) trend line, further support resides at the 96.50 area.

Euro/Yen Trend Analysis