The EURJPY currency pair is on the verge of securing its third consecutive week of gains, propelled by a robust 1.61% surge this week, primarily steered by the Euro’s notable strength.
The Euro Area witnessed a turnaround in inflation after seven consecutive months of decline, with December’s inflation spiking to 2.9%, a significant 50 basis points higher than the previous month. While European Central Bank policymakers had been cautious about immediate rate cuts, the inflation surge prompts a reconsideration, possibly pointing toward a prolonged period of higher rates.
Crucially, the interest rate differential between the Euro Area and Japan, where rates linger at -0.1% due to an ultraloose monetary policy, positions the Euro favourably. This dynamic suggests that capital markets may find the Euro more appealing in the quest for higher yields, further influencing the trajectory of the EURJPY pair in the intricate global currency landscape.
Technical
The EURJPY pair concluded the final quarter of 2023 on a sombre note, witnessing a downturn of just over 5% from the quarter’s peak. This descent formed a resistance level at 163.650, born amidst overbought Relative Strength Index (RSI) conditions, triggering a downtrend as the pair slipped beneath the 100-day moving average.
However, at the 153.115 level, optimism emerged as bullish traders found solace amid oversold RSI conditions. This marked a turning point, catapulting the pair back above the 100-day moving average and, notably, surpassing the critical 61.80% Fibonacci Retracement Golden Ratio.
This breach signals robust upside momentum, hinting at a shift in sentiment. If this upward trajectory holds firm, a retest of the 163.650 resistance level becomes a plausible scenario. Conversely, should downside pressures resurface, the Golden Ratio may act as a pivotal point for bears in this intriguing chapter of EURJPY price action.
Summary
Optimism reigns as the EURJPY currency pair marks its third consecutive week of gains, driven by a resilient Euro and favourable interest rate differentials. Technicals showcase a rebound from the
support level, while the breach of the 61.80% Fibonacci Retracement signals robust momentum, offering the potential for a retest of the resistance or a pivotal point if bearish pressures return.
Sources: EUROSTAT, Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.
Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.
CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.
