HFM information and reviews
HFM
96%
Octa information and reviews
Octa
94%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%

EUR/JPY poised for high volatility


29 July 2016

The Bank of England (BoE), European Central Bank (ECB) and most recently, the US Federal Reserve, have all issued their most recent monetary policy statements in the past two weeks. All of these three major central banks opted for inaction – the BoE and ECB refrained from implementing post-Brexit stimulus measures for the time being while the Fed again deferred a long-postponed rate hike. Friday finally brings the Bank of Japan’s (BoJ) highly-anticipated policy statement, which will most likely buck this recent trend of inaction.

On Wednesday, Japanese Prime Minister Shinzo Abe revealed an unexpectedly sizable 28 trillion yen government stimulus package, which placed immediate pressure on the BoJ to follow suit by expanding its stimulus program. The key question weighing now on the global markets, and the yen in particular, is the extent to which the central bank will cooperate with Abe’s aims to boost Japanese economic growth.

Most analysts expect some form of stimulus from the central bank, including possible asset purchases and/or a further interest rate cut, but the uncertainty lies in the magnitude of these actions. This magnitude will likely serve as one of the main drivers of market movement on Friday and into next week for both the Japanese yen and major equity markets. Of course, in the very unlikely event that there is no BoJ action at all, volatility in the markets should be particularly pronounced, potentially leading to a dramatic surge for the yen.

As usual, USD/JPY will be one to watch, as it can serve as a good barometer of yen movement. Another key currency pair that should also see high volatility during this event, however, will be EUR/JPY, especially since Friday also brings a solid series of European economic data.

In the event of more comprehensive stimulus than expected from the BoJ on Friday, the yen will likely be pressured to retreat sharply, pushing EUR/JPY to rise and extend its rebound from recent multi-year lows. In the opposite event of a substantially lighter stimulus package that disappoints Abe and other Japanese government officials, the yen could resume its longer-term strengthening, potentially pressuring EUR/JPY to continue its downtrend of the past year.

This EUR/JPY downtrend is clearly framed by two key trend lines that have shown an acceleration of the bearish trend this year. Most recently, the currency pair established a post-Brexit multi-year low around 109.50 in late June. This was followed by a rebound within the past three weeks that boosted EUR/JPY up to a key 61.8% Fibonacci retracement level before falling back.

Currently, in the immediate run-up to the BoJ policy statement, the currency pair is bumped up against its 50-day moving average to the upside. To the downside is the major 115.00 support level. Depending on the outcome of the policy statement, any surprise could likely lead to a breakout price move. With less-than-expected stimulus, EUR/JPY could break down below 115.00, which could put it on track to target downside support around 111.00, followed by a potential resumption of the entrenched bearish trend. With more-than-expected stimulus, EUR/JPY could rise above its 50-day moving average, in which case, the next major resistance targets are around the 119.00 level, followed further to the upside by the noted accelerated downtrend line.

Share: Tweet this or Share on Facebook


Related

EURJPY Re-Enters Bullish Channel, Supported by 200-Day SMA
EURJPY Re-Enters Bullish Channel, Supported by 200-Day SMA

EURJPY has staged a comeback following a period of weakness during which it temporarily fell below its established bullish channel, originating in June. The resurgence is primarily attributed to the pair's...

23 Jan 2024

Crucial Upside Barrier at 160.00 Mark in Focus Amid Geopolitical Tensions
Crucial Upside Barrier at 160.00 Mark in Focus Amid Geopolitical Tensions

The EUR/JPY currency pair finds itself under pressure during the early European session on Friday as geopolitical tensions in the Middle East weigh on market sentiment...

12 Jan 2024

EURJPY's Ascending Trajectory: Balancing Highs with Emerging Risks
EURJPY's Ascending Trajectory: Balancing Highs with Emerging Risks

As the EURJPY pairing continues its impressive ascent, reaching levels not seen since August 2008, investors and traders alike are met with a mix of enthusiasm and caution...

14 Nov 2023

Japanese Economic Outlook: Anticipating Impact of GDP and BoJ Decisions on Market Dynamics
Japanese Economic Outlook: Anticipating Impact of GDP and BoJ Decisions on Market Dynamics

As global financial markets gear up for the upcoming release of Japan's Q3 GDP report on Wednesday at 01.50 GMT, expectations and speculation are high...

13 Nov 2023

EURJPY Analysis: BoJ's Dovish Tone Sparks Momentum, Yet Resistance Looms
EURJPY Analysis: BoJ's Dovish Tone Sparks Momentum, Yet Resistance Looms

The EURJPY currency pair has emerged as a focal point in the forex market, following recent developments from the Bank of Japan (BoJ) and the subsequent shifts in the technical landscape...

1 Nov 2023

Navigating Euro Fluctuations Amidst the Yen's Uncertain Strength
Navigating Euro Fluctuations Amidst the Yen's Uncertain Strength

The international currency landscape is undergoing a subtle yet significant transformation, as evidenced by recent movements in the US Dollar and the ensuing repercussions on the EURJPY pair...

6 Oct 2023


MultiBank Group information and reviews
MultiBank Group
84%
XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.