Top Story

EUR/JPY maintains strength ahead of BoJ, ECB

With the first round of last Sunday’s French presidential election fading into the background and pro-euro candidate Emmanuel Macron still heavily favored to win the presidency in early May, the euro has managed to retain most of its recent gains, especially against the Japanese yen. EUR/JPY rose to hit a key historical support/resistance level around 122.00 on Wednesday after having gapped up in the aftermath of Sunday’s French vote outcome, as the euro surged in a relief rally while the yen dropped on lower safe-haven demand.

There is no shortage of political and economic events to move markets at the current time, including US President Trump’s plans to reform and cut US taxes, but the more pressing events for EUR/JPY will occur during Thursday’s Asian and European trading sessions. Both the Bank of Japan (BoJ) and European Central Bank (ECB) will issue their respective monetary policy decisions and statements on Thursday.

While both of these key central banks are not expected to make any major changes to monetary policy at this time, they will more than likely give hints as to future potential policy direction given recent and current economic and political developments. The BoJ is expected to keep its main interest rate target unchanged in negative territory (at -0.10%) as usual, and maintain its massive "quantitative and qualitative monetary easing" (QQE) program. Barring any surprises, the key to Thursday’s statement will be the BoJ’s updated projections on Japan’s economic growth and inflation, which could have a significant impact on the recently-plunging Japanese yen.

Meanwhile, the ECB is also expected to keep its minimum bid rate unchanged (at 0.00%). There had been some earlier speculation that the ECB may be looking to raise interest rates before unwinding its huge asset-purchase program, but that notion was later dispelled by the central bank for the time being. The current sentiment is that despite Emmanuel Macron being seen as the clear front-runner over Marine Le Pen for the French presidency in early May, the ECB will unlikely take any chances with this major political risk by sounding overly hawkish in Thursday’s statement. However, the general trend recently of rising inflation in the euro area may prompt more talk of a pullback in monetary stimulus, which could give a further boost to the euro.

Amid these key central bank decisions, EUR/JPY has reached up to a critical technical juncture. The currency pair has not only reached key resistance around the 122.00 level, as noted, but it has also tentatively broken out above a key long-term downtrend line extending back to the mid-2015 highs. A false breakout above this trend line occurred in mid-March before a sharp month-long plunge ensued. With any impending breakout above 122.00 surrounding Thursday’s central bank meetings, the major upside target remains around the 124.00 resistance level, around the December-January highs. Any sharp down-move from 122.00 resistance, however, could pressure EUR/JPY back down towards this week’s election-driven gap.


Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account