Yen crosses collapse on 'no news' ahead of BOJ

The Japanese Yen has surged dramatically across the board in what appears to be a massive withdraw of liquidity in extremely thin market conditions ahead of the Bank of Japan's monetary policy decision, due from 3 GMT onwards. EUR/JPY, which was showing constructive upward movements, has fallen from 116.80 down towards 114.70 in the blink of an eye in what can only be defined as very jittery market conditions.

EUR/JPY outlook

James Chen, CMT, Strategist at CityIndex, notes: "This EUR/JPY downtrend is clearly framed by two key trend lines that have shown an acceleration of the bearish trend this year. Most recently, the currency pair established a post-Brexit multi-year low around 109.50 in late June. This was followed by a rebound within the past three weeks that boosted EUR/JPY up to a key 61.8% Fibonacci retracement level before falling back."

James adds: "With less-than-expected stimulus, EUR/JPY could break down below 115.00, which could put it on track to target downside support around 111.00, followed by a potential resumption of the entrenched bearish trend. With more-than-expected stimulus, EUR/JPY could rise above its 50-day moving average, in which case, the next major resistance targets are around the 119.00 level, followed further to the upside by the noted accelerated downtrend line."