Amidst the backdrop of the Japanese Yen slipping to a 10-month low against the US dollar last Friday, the EURJPY currency pair embarked on a journey of bullish momentum. This surge was fuelled by recent remarks from Bank of Japan governor Kazuo Ueda, who indicated a high likelihood of Japan maintaining accommodative monetary policies even after ceasing its negative interest rates, a measure expected to commence as early as next month. The market’s anticipation of these dovish developments has further weakened the Japanese Yen, thus providing a favourable environment for the bullish ascent of the EURJPY currency pair.
While the Japanese Yen faces headwinds, the Euro stands resilient. The European Central Bank (ECB) continues to exhibit a cautious approach, pushing back against calls for premature rate cuts. This stance mirrors the consensus of the Federal Reserve, which remains committed to preserving the strength of the domestic currency, which further adds to the buying momentum witnessed in the currency pair’s price action.
Technical
On the 4H chart, a breakout has been confirmed from the prior descending channel, paving the way for a bullish advance. The uptrend has been sustained, pushing through both the Fibonacci midpoint and the 61.8% golden ratio. The 25-SMA (green line) has crossed above the 50-SMA (blue line), confirming the presence of buyers in the short term, but the RSI indicates potential overbought conditions, leaving the door open for a retracement.
This retracement could occur if resistance at 161.108 holds in the upcoming session. The prior supply zone near 160.878 could be a destination for the pullback, but if the price continues to move lower, it may retest the Fibonacci golden ratio at 160.430. This could be a pivotal level in determining whether the bullish momentum could be sustained long-term.
However, if the currency pair closes the day above 161.108, it could continue its ascent without a temporary pullback. Its next hurdle could be the resistance at 161.404 before it can retest the highs of the prior uptrend at the psychological 161.877 level.
Summary
The EURJPY currency pair’s bullish pressure was sustained in the Friday session as the Japanese Yen continued to weaken. If the price action closes the session above the 161.108 resistance, the current uptrend could continue toward 161.877, where the previous bullish run faltered.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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