The EURJPY pair has been under pressure in recent weeks, falling from a high of 163.717 on November 27 to a low of 158.378 earlier during the December 6 session. Several factors are weighing on the EUR/JPY pair.
Market sentiment has shifted sour in favour of the safe-haven Japanese yen (JPY). This is due to a number of factors, including concerns about a global recession, the war in Ukraine, and rising interest rates in the United States. Also, the growing sentiment that the European Central Bank (ECB) is likely to adopt a more dovish monetary policy stance in the coming months has weighed on the Euro. This is because inflation in the eurozone has fallen more quickly than expected.
However, the sentiment that the Bank of Japan (BoJ) is likely to maintain its ultra-loose monetary policy stance for the foreseeable future has also gained momentum. This is likely to keep the JPY weak and support the EURJPY pair.
Technical Analysis
The 4-hour chart shows that the EURJPY pair remains within a descending channel pattern, trading beneath the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line). The recent downward cross of the 20-SMA below both the 50-SMA and 100-SMA indicates sustained bearish pressure.
The RSI, near oversold levels at 30.78, suggests a potential pause in bearish momentum. Short-term opportunities could arise if bulls reclaim 159.00, aiming for resistance levels at 160.447 and 161.068. Conversely, sustained bearish pressure might lead to testing support at 158.643, with the potential for further downside towards 157.643.
Summary
EURJPY faces persistent bearish pressure amid rate cut expectations. Bulls may find short-term opportunities, but a cautious approach is warranted. A break above 159.00 could trigger bullish momentum, while a drop below 158.643 might intensify bearish sentiment.
Sources: TradingView, Trading Economics, Reuters, Business Recorder.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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