USDJPY trading above 161 ahead of BoJ policy meeting

EURJPY has recovered a big chunk of its losses sustained between mid-November through mid-December.

This FX pair is now testing that 78.6% Fibonacci retracement line for resistance around 161.908.

Bloomberg’s model shows 73% odds of EURJPY trading between 158.67 – 163.53 this week.

This week sees policy meetings by the European Central Bank and the Bank of Japan: the central bank that sounds more dovish might see its currency weaken.

Eurozone/Japanese data this week will also be viewed based on its implications on potential ECB/BoJ rate adjustments in the months ahead.

Events Watchlist
 

• Tuesday, January 23: Bank of Japan (BoJ) rate decision

To be clear, the BoJ is highly unlikely to adjust its policy balance rate this week, still keeping Japan as the only economy in the world that still has negative interest rates. But with markets now only expecting a rate hike in June, the Yen could soar if the BoJ warms up to exiting its negative rates regime either in March or April instead.
 

• Thursday, January 25: European Central Bank (ECB) rate decision

Similar to the BoJ, there’s near-zero chance of the ECB adjusting its rates this week, with markets predicting a 78% chance that the ECB will cut at its April meeting instead. ECB officials last week however have conveyed their preference to cut only starting in June. Any shifts to that timeline should rock the euro.
 

• Friday, January 26: Tokyo January CPI and BoJ meeting minutes

Economists forecast that these inflation prints will ease lower in January, compared to December’s year-on-year figures. Lower-than-expected CPI figures may buy the BoJ more time before needing to hike. Such expectations may cause the Yen to slump further, allowing EURJPY to push towards its November 2023 peak at 164.303.

Here’s comprehensive list of other key economic data and events due this week:

Monday, January 22

• CNH: China loan prime rates
   

Tuesday, January 23

• JPY: Bank of Japan rate decision
• EUR: Eurozone January consumer confidence
• NQ100_m: Netflix earnings
   

Wednesday, January 24

• JPY: Japan December trade balance; January PMIs
• EUR: Eurozone January PMIs
• GBP: UK January PMIs
• USD: US January PMIs
• CAD: Bank of Canada rate decision
• NQ100_m: Tesla earnings
   

Thursday, January 25

• NOK: Central Bank of Norway rate decision
• EUR: ECB rate decision; Germany IFO business climate
• USD: US 4Q GDP; weekly initial jobless claims
   

Friday, January 26

• JPY: Tokyo January CPI; Bank of Japan meeting minutes
• EUR: Germany February consumer confidence
• GBP: UK January consumer confidence
• USD: US December PCE Deflators, personal income and spending