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We’ve got not one but two central bank events coming around the corner to potentially shake up EUR/JPY. Will the upcoming monetary policy statements from the Bank of Japan and European Central Bank be enough to get both currencies moving?

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a simple break-and-retest setup on EUR/GBP, so be sure to check that out to see if there is still a potential play!

Intermarket Update:

Equity Markets Bond Yields Commodities & Crypto
DAX: 15705.81 -0.33%
FTSE: 7253.27 -0.33%%
S&P 500: 4551.68 -0.51%
NASDAQ: 15235.84 0.00%
US 10-YR: 1.548% -0.07
Bund 10-YR: -0.186% -0.007
UK 10-YR: 0.976% -0.009
JPN 10-YR: 0.084% -0.017
Oil: 82.08 -3.02%
Gold: 1,798.40 +0.28%
Bitcoin: $58,652.88 -5.40%
Ether: $3,962.30 -5.92%
BNB: $451.15 -7.27%

Fresh Market Headlines and Economic Data:

Bank of Canada ends bond-buying  program and moves up expectations of rate hike, possibly as early as Q1 2022

U.S. exports drop in September, increasing the merchandise-trade gap to a record $96.3B

New orders for U.S. manufactured durable goods in September decreased $B or 0.4% to $261.3B

U.K. Chancellor Sunak announced £75B of stimulus to boost economy

Tensions rise between the U.K. and France over fishing access

Shiba Inu surges to record as Robinhood petition signups reach 300K signatures

Bitcoin dips below $60K as bullish ETF reaction fades

Upcoming Potential Catalysts on the Economic Calendar

Japan Retail Sales at 11:50 pm GMT
Australia Import & Export Prices at 12:30 am GMT (Oct. 28)
Bank of Japan Monetary Policy Statement at 3:00 am GMT (Oct. 28)
Germany Unemployment Rate at 6:00 am GMT (Oct. 28)
Spain Unemployment Rate, Inflation Rate at 7:00 am GMT (Oct. 28)
Italy Consumer Confidence at 8:00 am GMT (Oct. 28)
Euro Area Economic Sentiment, Consumer Confidence at 9:00 am GMT (Oct. 28)
European Central Bank Monetary Policy Statement at 11:45 am GMT (Oct. 28)

If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.

What to Watch: EUR/JPY

EUR/JPY 1-Hour Forex Chart
EUR/JPY 1-Hour Forex Chart

On the one hour chart above of EUR/JPY, we’ve got a pretty clear downtrend in the works over the past week, albeit at a slow and steady pace. Support and resistance levels seem to be clearly defined, with the market now hovering around the strong support area around the 132.00 major psychological level.

Actually, prices seem to be consolidating tightly at the moment, which makes sense given that traders are likely waiting on the sidelines ahead of monetary policy statements from both the Bank of Japan and European Central Bank in the upcoming Thursday session.

Expectations for the BOJ event are for it to be a snoozer as no changes are forecasted, while the ECB may be the event to get EUR/JPY moving as traders will closely watch for the ECB’s comments on current European risks like the energy crisis and supply chain issues.

We think the issues in Europe will likely be the main focus for EUR/JPY traders, and unless the ECB gives some sort of optimistic view that Europe will be able to get past those issues quickly, the trend in EUR/JPY is likely to remain lower as traders price in no rate hikes for the foreseeable future.

In that scenario, any pick up in volatility could turn into a swing or longer-term short position opportunity if the market bounces up to the falling trendline marked on the chart above/previous area of interest (between 132.60 – 132.80). Be on the look out there for bearish reversal candles, especially if the ECB gives a relatively negative outlook on how long it will take Europe to overcome the energy and supply chain challenges.

Also be on the look out for a sustained break of the 132.00 support area as it could draw in momentum sellers if we do get a negative take from the ECB tomorrow, or even if broad market sentiment sours in the upcoming session.