The EURJPY currency pair embarked on a compelling trajectory in 2023, marking its fourth consecutive year of gains with a substantial nearly 11% surge.
Behind this surge lies the compelling interrelation between the Euro and the Yen, largely propelled by the diverging paths of their respective central banks’ interest rates. The European Central Bank (ECB) raised rates to their highest in 15 years, a stark contrast to the Bank of Japan’s (BoJ) ultraloose monetary policy, maintaining rates at -0.1%.
This interest rate differential acted as a magnetic force, likely drawing capital toward the Euro Area due to its higher yields at the expense of the Yen’s allure. Now, all eyes turn to the Euro Area’s upcoming inflation data, serving as a compass for traders gauging potential shifts in ECB policies, thus sculpting the future path of the EURJPY pair.
Technical
In 2023, the EURJPY pair witnessed a battle of forces, with the Yen rallying to recover some lost ground against the Euro, notably paring losses despite yielding ground earlier in the year. The final quarter saw the pair’s descent, marking a downtrend that drove it below the 100-day moving average on the daily chart—a significant technical shift.
Amidst this decline, a key support level emerged at 153.115, with oversold RSI conditions prevailing, sparking a temporary upturn. This upswing found resistance at the 50% Fibonacci Retracement level around 158.568, signalling a barrier within the broader downtrend. Subsequent downside momentum reaffirmed this level as resistance, indicating a potential downward trajectory.
A sustained downside push might spotlight the 153.115 support level as an area of interest, while an upswing could potentially retest the 50% level, highlighting the pair’s sensitivity to momentum shifts and key technical levels in shaping its future trajectory.
Summary
The EURJPY’s resilience in 2023, marking its fourth consecutive year of growth, reflects the intricate battle between the Euro and the Yen, driven by diverging central bank policies. Despite a late-year downturn, pivotal technical levels like 153.115 and 158.568 signify a tug-of-war, highlighting the pair’s sensitivity to market shifts.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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