EUR/JPY Weekly Fundamental Analysis, October 6 – October 10, 2014 Forecast

The EUR/JPY finished lower for a second straight week, putting the market in a position to challenge a key support level next week at 135.808.

Last week’s surprise from the European Central Bank was not enough to help the Euro recover from its slide on the weekly chart although it did find support on the daily chart.

The Euro firmed against the Japanese Yen late in the week, following the European Central Bank monetary policy announcement on October 2. The fact that the ECB did not suggest that any type of quantitative easing program was on the horizon was the primary reason behind the mild strength.

In his post-meeting press conference, ECB President Mario Draghi emphasized that the central bank’s main goal is to maintain the inflation rate at nearly 2 percent and that the ECB’s balance sheet is simply an instrument.

Traders had initially priced in additional quantitative easing, but Draghi stated that the ECB would continue with its current policies aimed at expanding credit.

The challenge for the Bank of Japan policymakers at its October 7 meeting is justifying its rosy inflation forecasts even as a slew of weak data threatens to force the BOJ to cut their economic growth projections later this month.

The central bank is widely expected to keep monetary settings unchanged at its meeting. However, at its more critical rate review on October 31, the BOJ will produce fresh economic forecasts. Given the recent weak economic data, its growth expectations are expected to be turned down a notch.

This week could see two-sided trading. The Euro could find support because it did not make the quantitative easing announcement last week that investors were looking for. However, the BOJ statement may contain good news about the central bank’s assessment of the economy that will make the Yen a more attractive investment.

High Impact Economic Events That Traders Should Be Aware Of This Coming Week

Currency         Event                                                                      Forecast                           Previous

Monday, October 6

There are on high impact economic events today.

Tuesday, October 7

JPY                  Bank of Japan Monetary Policy Statement

JPY                  Bank of Japan Press Conference

Wednesday, October 8         

There are on high impact economic events today.

Thursday, October 9

EUR                ECB President Draghi Speaks

Friday, October 10

There are on high impact economic events today.