The EUR/JPY currency pair has extended its downtrend to fresh lows in the sub-139.00 zone, signaling further losses for the cross. The bearish trend, which started in early March 2023, has continued to be driven by a range of factors, including the ongoing COVID-19 pandemic and the strength of the Japanese Yen.
Technical Analysis of EUR/JPY
From a technical perspective, the recent breach of the sub-139.00 zone is significant, as it marks a continuation of the bearish trend. The next immediate support level for the currency pair is at the weekly low of 137.91, which was last seen on January 19th. This support level will be closely watched, as a break below it could open the door to further losses towards the 2023 low of 137.38, which was last seen on January 3rd.
On the upside, the 140.00 level will likely act as resistance, followed by the 50-day SMA at around 141.00. For the EUR/JPY currency pair to reverse its downtrend, it will need to break above these levels and establish a new support base.
Factors Contributing to the EUR/JPY Downtrend
Several factors are contributing to the continued downtrend of the EUR/JPY currency pair. One of the main factors is the ongoing COVID-19 pandemic, which has led to renewed lockdowns and other restrictive measures in the Eurozone. These measures have had a significant impact on economic activity, leading to a decline in the value of the Euro.
Another factor contributing to the downtrend of the EUR/JPY currency pair is the strength of the Japanese Yen. The Yen has been one of the strongest currencies in the forex market in recent weeks, supported by a more hawkish Bank of Japan and rising yields on Japanese government bonds. This has made the Yen more attractive to investors, leading to increased demand for the currency.
Overall, the combination of these factors has created a bearish environment for the EUR/JPY currency pair, with downward pressure likely to continue in the near future.
Conclusion
The EUR/JPY currency pair has breached the sub-139.00 zone, extending its downtrend and signaling further losses for the cross. Immediate support levels lie at the weekly low of 137.91, with the 2023 low of 137.38 a potential target if the pair continues to decline. The ongoing COVID-19 pandemic and the strength of the Japanese Yen are contributing factors to the bearish environment for the currency pair. Traders should closely monitor these factors and technical indicators to gain a better understanding of the future direction of the EUR/JPY currency pair.
