- EUR/JPY is likely to rise to about 166.50 during early European trading on Monday.
- The optimistic outlook for the pair seems to outweigh the significant 100-day EMA, supported by bullish RSI indicators.
- Key resistance levels are anticipated around 166.90-167.00, with initial support at 164.95.
The EUR/JPY pair reached approximately 166.50 at the start of European trading hours on Monday. There’s a generally positive sentiment in the stock market, which tends to favor a safe-haven currency like the Japanese Yen (JPY). Yet, rising geopolitical tensions in the Middle East could potentially shift the balance.
Eyes are on the Bank of Japan (BOJ) as it prepares for its interest rate decision on Tuesday. The expectation is to maintain the benchmark rate at 0.5% during the June meeting.
From a technical standpoint, the outlook for EUR/JPY looks promising, with the price holding above the key 100-day exponential moving average (EMA) on the daily chart. The momentum is further reinforced by a relative strength index (RSI) hovering around 67.75, indicating short-term bullish momentum.
The crucial resistance level seems to be in the 166.90-167.00 range, acting as both an upper boundary and a psychological mark within the Bollinger band. If this level is breached, a rally could potentially lead to a peak near 170.75 by the end of May 2024. Going further, the next target to monitor would be 171.60, which was reached on April 29, 2024.
On the downside, the lowest point recorded on June 13 at 164.95 serves as the initial support for EUR/JPY. If the price falls below this, it might drop to around 162.90, last seen on June 5. Other levels to keep an eye on include the 100-day EMA at 162.60.
EUR/JPY Daily Chart
Japanese Yen Questions
The Japanese Yen (JPY) is among the most traded currencies worldwide, influenced largely by the Japanese economy’s performance, the Bank of Japan’s policies, differences in bond yields with the US, and the general sentiment in the market.
One of the key roles of the Bank of Japan is managing currency fluctuations, although it typically intervenes cautiously due to political concerns with major trading partners. The ultra-loose monetary policy in place from 2013 to 2024 widened the gap between BOJ and other central banks’ policies, resulting in the yen depreciating against major currencies. Recently, there has been some support for the yen as the ultra-loose policy begins to unwind.
Over the last decade, the BOJ’s commitment to this loose monetary stance has diverged significantly from the positions of other central banks, particularly the US Federal Reserve. This divergence heightened the differences in bond yields between the US and Japan, and affected how the US dollar stacks up against the yen. Decisions made by the BOJ in 2024, along with interest rate cuts from other major central banks, are starting to close this gap.
The yen is often viewed as a safe-haven investment. During times of market stress, investors may flock to the yen for its perceived reliability and stability, potentially increasing its value against riskier currencies.
