EURJPY is one of the currency pairs that is experiencing elevated volatility today. Bank of Japan meeting is a prime reason behind JPY-volatility while slew of data releases from Europe as well as speeches from ECB members is ensuring EUR-volatility.
Bank of Japan decided to keep interest rates and other monetary policy settings unchanged at a meeting today. There were some expectations that BoJ may announce changes to yield curve control and it did… to some extent. BoJ said that bandwidth around target yield will remain unchanged at +-0.5% but it will allow greater flexibility, meaning that yields may be allowed to deviate as much as 1% from the target. While not a clear and explicit change to yield curve control parameters, the move is seen as paving that way for dropping YCC altogether in the future
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Moving on to EUR-side, there were some interesting comments offered by ECB members this morning. Stournaras said that if a hike is delivered at the September meeting it will be the last one and rates will stay at the peak for a few months. Similar comments were voiced by Vasle who said that the September meeting may bring a hike or a pause in the cycle. Apart from ECB speeches, a number of macro reports from Europe was released today, including an unexpected pick-up in Spanish inflation in July. There is one more key piece of data from Europe scheduled for release today - German CPI report at 1:00 pm BST.
Taking a look at EURJPY chart at D1 interval, we can see that the pair is realizing an important technical pattern - double top. Pair broke below the neckline of the pattern in the 153.50 area, paving the way for a deeper drop. Textbook range of the downside breakout from the pattern suggests a possibility of EURJPY dropping to as low as 149.00. However, it should be noted that today's BoJ decision triggered massive volatility with the pair trading 1% higher at one point earlier today and 1% lower at another. Currently the pair is little changed on the day and the shape of today's daily candlestick shows that there is a lot of indecisiveness on the market.
EURJPY at D1 interval. Source: xStation5
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