The EURJPY currency pair is charting a promising course, poised for its third straight day of advances fuelled by the latest economic revelations. The Jibun Bank Manufacturing PMI fell short of expectations in Japan, dropping to 47.2 from the previous 48, amplifying pressure on the Japanese Yen. Traders remain convinced of the Bank of Japan’s steadfast commitment to its accommodative monetary policy stance, further bolstering the weakening Yen.
Meanwhile, across the Eurozone, PMI figures paint a robust picture, with the Services PMI surpassing projections at 50, a notable uptick from the previous 48.4. Additionally, market attention was drawn to Eurozone inflation data. Core inflation held steady in line with forecasts at 3.3%, albeit marginally lower than the previous 3.4%. Similarly, the year-over-year inflation rate registered a modest decline from 2.9% to 2.8%, aligning with market expectations.
Despite the absence of downside surprises, market sentiment remains unwavering in its anticipation of the European Central Bank’s prolonged maintenance of higher interest rates. As the economy continues its battle against inflationary pressures, the prevailing consensus holds firm, driving market dynamics in favour of sustained euro strength against the Yen.
Technical
On the daily chart, an ascending channel has formed, with the crossing of the 25-SMA (green line) above the 50-SMA (blue line) and 100-SMA (orange line) confirming the bullish presence. Underpinned by support at 162.755, the price action remains under bullish control. Still, the RSI signals that the currency pair could trickle into overbought territory, opening the door to a potential pullback.
This pullback could be initiated if the support at 162.755 fails in the upcoming sessions. Lower support at 161.723 could then be the last line of defence against a potential channel breakdown, which could lead the price toward 160.794, where the 25-SMA offers further support. While a pivot and retracement is possible here, an additional leg lower could lead the price toward the Fibonacci midpoint at 158.681 in the longer term.
Conversely, if support at 162.755 holds, the resistance at 163.553 could become a likely destination. This resistance was previously held, and could create a challenging barrier for the pair in the upcoming sessions. However, if the bulls do breach this level, the price action could continue its upward momentum toward another psychological resistance level at 164.258.
Summary
The EURJPY currency pair looks on track to complete its third consecutive day in the green. In the upcoming session, support at 162.755 could be worth watching as a determining level to gauge whether the bullish pressure could persist toward 163.553.
Sources: Koyfin, Tradingview
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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