- EUR/JPY refreshed session tops after the BoJ announcement, albeit lacked follow-through.
- The BoJ expanded its JGB trading band and dropped its ¥6 trillion yearly ETF buying target.
- The decision did little to provide any meaningful impetus ahead of the post-meeting presser.
The EUR/JPY cross edged higher in reaction to the BoJ announcement and refreshed session tops, around the key 130.00 psychological mark, albeit quickly retreated few pips thereafter.
As was anticipated, the Bank of Japan (BoJ) decided to leave its benchmark interest rate and 10-year JGB target unchanged at -0.1% and 0%, respectively. The central bank, in a long-awaited policy review, expanded its JGB trading band to 25bps on either side and dropped its ¥6 trillion yearly ETF buying target.
Given that the two key measures were already anticipated for weeks in advance, the initial market reaction turned out to be rather short-lived. The EUR/JPY cross retreated around 20-25 pips and has now moved back to the pre-BoJ levels, closer to the lower boundary of its weekly trading range near the 129.75 region.
Meanwhile, the shared currency found some support after European nations resumed the usage of AstraZeneca’s COVID-19 vaccine. However, the bullish tone surrounding the US dollar kept a lid on any meaningful gains for the euro. This, in turn, suggest that the path of least resistance for the EUR/JPY cross is on the downside.
That said, investors are likely to wait for the post-meeting press conference, where comments by the BoJ Governor Haruhiko Kuroda might infuse some volatility around the JPY pairs. This should provide some impetus to the EUR/JPY cross and allow traders to grab some short-term opportunities.
Technical levels to watch