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Forex: EUR/JPY soars on BoJ action

FXstreet.com (Barcelona) - On a surprising announcement of more BoJ policy stimulus than expected, the Yen is plunging against its counterparts. The EUR/JPY is currently +2.26% higher as the market prices in that news from Japan and trades ahead of the ECB meeting. The cross is up from 119.38 to 122.50, where it is currently finding resistance.

The BoJ is now targeting the monetary base rather than the overnight call rate. Surpassing market consensus of 10y point, Rinban operations and the JGB component of the Asset Purchase Program were folded into a new purchasing program with the authority to buy all along the JGB curve - even out to the 40y point. The BoJ expects its total holdings of JGBs to rise to Y140 trn by end-2013, Y26trn more than the previous guidance. JGB holdings are now forecast to rise a further Y50 trn during 2014.

“The press conference should be a busy one, with Draghi getting questions on the disappointing Eurozone survey data, whether some ECB members are still pushing for rate cuts, the Cypriot crisis and capital controls, contagion into Slovenian debt and worries of deposit flight elsewhere, and uncertainties over the Italian elections. There is a risk Draghi reinforces some of the disappointment in the data and ability of the ECB to respond if needed, but we don’t see them ready to act yet”, wrote TD Securities analysts.

Commerzbank analysts point to resistance at “122.35/57 (20 and 55 day ma) that guards the March high at 126.03 and the 127.71 February high back on the map”, wrote analyst Karen Jones.

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