- EUR/JPY gains traction, approaching 172.60 during the Asian session on Monday, marking a 0.20% increase for the day.
- Positive sentiment surrounds the pair as it trades above the significant 100-day EMA, with bullish indicators from the RSI.
- Immediate resistance is noted at 173.00, while the first support level to monitor is at 171.51.
During Monday’s Asian trading hours, the EUR/JPY cross is likely to attract buyers near 172.60. This shift is influenced by the weaker Japanese yen (JPY) and the uncertainty surrounding the Bank of Japan’s (BOJ) potential interest rate hike. A speech by European Central Bank (ECB) President Christine Lagarde later this Wednesday will also be significant.
Looking at the Daily Chart, the EUR/JPY maintains a positive outlook as it resides above the critical 100-day exponential moving average (EMA). The upward momentum is further supported by a 14-day relative strength index (RSI) hovering around 58.00, indicating a bullish trend recently.
On the upside, initial resistance is identified near 173.00, which is a psychological and significant level reached on August 13th. If trading remains above this threshold, it could boost momentum, potentially targeting the upper limit of the Bollinger Band at 173.50. Higher resistance is then seen at the July 28th peak of 173.90.
Conversely, for bearish trends, the low from August 15th at 171.51 marks the initial support level for EUR/JPY. Following that, watch for the lower limit of the Bollinger Band at 170.35. A breach of this level may push the cross down towards the round figure of 170.00.
EUR/JPY Daily Chart
Japanese Yen Questions
The Japanese Yen (JPY) is one of the most traded currencies globally. Its valuation largely reflects the state of the Japanese economy and is influenced by the policies of the Bank of Japan, variations in bond yields relative to the US, and trader sentiment, among other factors.
The Bank of Japan has a crucial role in currency management, making movements significant for the yen. While the BOJ has typically intervened in the currency market to curb yen depreciation, it doesn’t do so frequently due to political implications with major trading partners. The ultra-loose monetary policy from 2013 to 2024 contributed to a divergence between the BOJ and other major central banks, leading to a depreciation of the yen. Recently, the yen received some support as this ultra-loose approach gradually unwinds.
Throughout the past decade, the BOJ’s commitment to an ultra-loose monetary policy has resulted in increased disparity with other central banks, particularly the US Federal Reserve. This created a widening gap between US and Japanese bond yields and affected the US dollar’s value against the yen. The BOJ’s decisions in 2024, alongside interest rate cuts by other central banks, are expected to narrow this gap.
The Japanese yen is often seen as a safe-haven asset. During periods of market stress, investors tend to flock to the yen for its reliability and stability. Consequently, in times of economic turbulence, the yen may strengthen against riskier currencies.
