Early on Tuesday, the EURJPY currency pair felt the ripple effects of Japanese inflation data. Year-over-year inflation dipped from 2.6% to 2.2% in a notable shift, marking its lowest point since March 2022. This downward trend was attributed to a sluggish rise in food prices, which saw their slowest increase in 16 months. While market expectations hinted at core inflation slipping below the Bank of Japan’s (BoJ) 2% target to 1.8%, the actual figure defied predictions, stubbornly holding steady at 2%, albeit lower than the previous 2.3%. This alignment with the BoJ’s target range signalled a departure from the prior 21 months of surpassing it.
The Japanese Yen drew strength from these developments, yet the market’s response remained tentative amidst the mixed report. Investors are carefully assessing the trajectory of the BoJ’s monetary policy, eagerly anticipating signs of a potential pivot from its ultra-loose stance.
Technical
On the 4H chart, a steady uptrend has formed as the price continues on a bullish trajectory, leveraging the 25-SMA (green line) support, which trades above the 50-SMA (blue line) and 100-SMA (orange line) in a signal of bullish momentum. However, the RSI nears overbought conditions, which could result in a pullback in the upcoming sessions.
Support at 163.217 currently keeps the uptrend intact, and any movement below this support in the upcoming session could trigger a trend reversal. Support at 162.693 could be the first hurdle to the downtrend, while lower support at 162.412 has backing from the 50-SMA, creating a psychological support level that could act as a pivot point for a retest of the selloff.
Conversely, if the pair remains above 163.217, the bullish momentum could be sustained. Resistance at 163.741 and 164.065 could then come into focus before the 161.8% Fibonacci extension provides psychological resistance at 164.201, which could halt the momentum in the upcoming sessions.
Summary
The EURJPY currency pair maintained its steady uptrend in the Tuesday session despite a mixed inflation report from Japan. Support at 163.217 could be worth watching as we advance to determine whether the bullish momentum can be sustained.
Sources: Koyfin, Tradigview, Trading Economics
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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