EUR/JPY looking heavy within technically positive territory ahead of BoJ/ECB meetings

Currently, EUR/JPY is trading at 121.40, up 0.26% on the day, having posted a daily high at 121.50 and low at 121.03.

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EUR/JPY was well bid at the start of this week and was leading the pack on the yen crosses. The cross dropped overnight from 121.63 to 120.90 the low. At the same time,  USD/JPY was bid overnight to 111.77 although gave background to below the 111 handle to 110.86 lows on the back of the dollar getting a whack on Trump's tax plan announcements. The dollar was bid with US yields at the start of the day trading as high as 2.33% in the 10 years before the announcements. Stocks also finished in the red on the back of them.

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Markets will now turn to the Bank of Japan who will have its monthly monetary policy meeting later today. However, there are no changes that are expected from the meeting so markets will instead look to Thursday's US Durable Goods Orders and US GDP at the end of the week.

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The ECB will be the first risk event though and that is less of a certain outcome and the cross will be a key pair to monitor over the event. “In our view, the pricing of hikes from ECB is very premature as the inflation outlook should not be strong enough to tighten the monetary policy this year. Another argument for hiking rates could be that banks were suffering after the long period of negative policy rate but it does not seem to be the case that the ECB wants to hike just to support the banking sector,” explained analysts at Danske Bank.

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EUR/JPY levels

From a technical point of view, Valeria Bednarik, chief analysts at FXStreet explained the pair is struggling around a major resistance, the 23.6% retracement of the late 2016 monthly rally at 121.40. "The 4 hours chart shows that not certain directional strength, although the positive tone persists, given that the price is well above the 100 and 200 SMAs, whilst technical indicators have corrected extreme overbought readings, but turned flat within positive territory."