The Euro seeks traction against the Yen despite mixed economic data and hawkish whispers from both sides of the pond. A technical recession for the Eurozone was narrowly avoided, yet Germany’s slump and France’s stagnation raise concerns about regional resilience. Meanwhile, Japan’s unexpectedly strong jobs data fuels speculation about BoJ tightening, but softer retail sales and industrial production keep the Yen under pressure.
The Yen also finds strength in BoJ officials hinting at a potential exit from their ultra-loose policy. A recent Summary of Opinions revealed discussions on ending negative rates, buoying the Yen. The Federal Reserve’s upcoming policy decision weighs heavily, with markets divided on the timing of the first rate cut. ECB rate cut expectations linger, further pressuring the Euro. Market sentiment remains fragile, with geopolitical risks and China’s woes adding to the uncertainty.
The 4-hour chart shows that the currency pair currently trades at 159.93, within a bullish flag pattern. The price action currently trades below the 20-SMA (green line), 50-SMA (blue line), and 100-SMA (orange line), but a recent 20-SMA crossover above 50-SMA suggests the presence of bullish momentum.
A mildly upward-sloping rsi around 45.80, indicating cautious sentiment. Therefore, Short-term trading opportunities could exist towards the resistance level at the 38.20% Fibonacci retracement level (160.231) should the bulls sustain a push above the 23.60% Fibonacci retracement level. A break above the initial resistance could confirm the bullish momentum, likely bringing the 61.80% Fibonacci retracement level (160.856) and 161.867 resistance levels into play.
However, short-term trading opportunities could arise towards the initial support at 159.219 should the bearish sentiment persist past the 23.60% Fibonacci retracement level. A break below the 159.219 level would likely bring the 158.412 and 157.201 support levels into play in the short term.
The EURJPY faces a pivotal moment. Bouncing off key support and overcoming the 23.60% level could ignite a bullish breakout. However, Euro data headwinds and Yen uncertainty could trigger a bearish retracement.
Sources: TradingView, Trading Economics, Reuters, Dow Jones Newswire, European Commission.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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