Summary of USD/JPY and EUR/JPY: Diverging Setups Ahead of ECB and BOJ
Author: Matt Simpson
Date: October 28, 2026
Overview
The article discusses the current technical setups for USD/JPY and EUR/JPY as they approach significant central bank meetings from the European Central Bank (ECB) and the Bank of Japan (BOJ). It highlights how expectations from these central banks could influence the movements of the yen against the dollar and euro.
Central Bank Expectations Shape the Yen Outlook
The Federal Reserve recently held interest rates steady at 3.75–4%, with two members dissenting in favor of a rate hike. The Fed's assessment of economic activity has improved, but concerns about inflation and consumer confidence remain. Market expectations suggest a potential rate increase in December, although there is caution due to rising energy prices.
ECB and BOJ Decisions Put EUR/JPY in Focus
The ECB is expected to maintain its deposit rate at 2.50%, but ongoing inflation could lead to future tightening. Market sentiment has shifted, with expectations for the ECB's tightening cycle softening since early October. The BOJ is also anticipated to keep rates unchanged at 1.25%, but there is a significant probability of a December hike. The narrowing interest rate differential between Europe and Japan could impact EUR/JPY movements.
Technical Analysis: Diverging Setups
USD/JPY Shooting Star Signals Resistance Ahead of BOJ
USD/JPY has shown signs of weakness at a key resistance level following the Fed's decision. A shooting star pattern indicates potential resistance, suggesting a bearish move could occur if the BOJ adopts a hawkish stance.
EUR/JPY Falling Wedge Hints at Rebound Ahead of ECB and BOJ
EUR/JPY is forming a falling wedge pattern, indicating a possible bullish reversal. If the ECB adopts a hawkish tone while the BOJ remains dovish, this could lead to a significant upside move. The article notes that a break below 175.56 could lead to further declines, while a confirmed bullish pattern could target levels around 180.
Conclusion
The upcoming meetings of the ECB and BOJ are crucial for determining the future direction of both USD/JPY and EUR/JPY. The divergence in their monetary policies could create significant trading opportunities based on the technical setups currently observed.