EUR/JPY at 1-week lows ahead of BoJ, ECB

EUR/JPY is having the worst day in a week. The pair dropped to test a key short-term support located around 128.50. It is trading at 128.65/70, holding a negative tone but so far it remains above last week lows. 

Consolidation at risk 

A week ago the pair tumbled from 1-year highs above 130.50 and bottomed last Wednesday at 128.48. Since then it has been moving in a range with support at 128.50 and resistance at 129.50. 

Yesterday EUR/JPY traded above 129.50 but it was rejected and lost strength. Since then it is moving with a bearish bias. Recently, dropped quickly to a fresh daily low at 128.57, as USD/JPY fell further and a correction in EUR/USD. A consolidation below 128.50 could lead to an extension of the correction. The next strong support is seen at 128.00. If the euro remains on top, the current consolidation stage could continue. A break above 129.50 would add momentum to the euro. 

Key hours ahead

Thursday is likely to be a very volatile day for the pair. The Bank of Japan and also the European Central Bank will have their policy meetings. In Japan, the central bank is expected to keep policy unchanged and could make some changes to forecasts. In Europe, the ECB is also expected to remain on hold regarding rates and QE. The words of the statement and what Draghi says will be watched closely.

BoJ: what to expect this time around? - UOB 

ECB Meeting: warming up for tapering or not?

ECB to evolve its assessment and extend its removal of downside risks - BBH