The world of foreign exchange is a fascinating and complex one, with a multitude of factors influencing the movement of currency pairs. One such pair that has garnered the attention of many traders and investors is the EUR/JPY. In this article, we will delve into the recent developments and trends surrounding this currency pair and what traders can expect in the coming days.
German Inflation Data and its Impact on EUR/JPY
On Thursday, the German inflation data was released, which decelerated to 9.2%, surprisingly from the consensus of 10.0% and the former release of 9.6%. Although the Eurozone inflation is showing the negative impact of higher interest rates by the European Central Bank (ECB), the price index is still far from the required target. As a result, more interest rate hikes by ECB President Christine Lagarde cannot be ruled out. This news had a significant impact on the EUR/JPY pair, leading to a correction in its price.
Nominations for Bank of Japan Governor
Investors are eagerly awaiting nominations for Bank of Japan (BoJ) Governor Haruhiko Kuroda’s successor, which is expected to provide further guidance over the Japanese Yen. The appointment of the next governor is expected to have a considerable impact on the yen’s performance and, in turn, the EUR/JPY pair.
EUR/JPY in an Inventory Adjustment Phase
The EUR/JPY pair is currently in an inventory adjustment phase above 141.00, with traders and investors looking to negate the Inverted Flag formation on an hourly scale. This chart pattern indicates a consolidation phase, which serves as an inventory adjustment, allowing participants to initiate shorts and prefer to enter an auction after the establishment of a bearish bias.
Short-Term Trend Turns Bullish
The cross has scaled above the 20-period Exponential Moving Average (EMA) at 141.04, indicating that the short-term trend has turned bullish. Meanwhile, the Relative Strength Index (RSI) (14) has climbed into the bullish range of 60.00-80.00, suggesting that an upside momentum is building.
What Does the Future Hold for EUR/JPY?
For an upside move, the cross needs to surpass January 25 high at 142.29, which will drive the asset towards January 11 high at 142.61 followed by October 24 low at 143.72. On the other hand, a break below February 7 low around 140.30 will drag the asset towards January 17 high at 139.62 and January 13 low around 138.00.
In conclusion, the EUR/JPY pair has displayed a volatile behavior following the release of the German inflation data which decelerated to 9.2% from the expected 10.0%. Despite the negative impact of the higher interest rates by the European Central Bank, the price index is still far from the required target, hence, the possibility of more interest rate hikes cannot be ruled out.
On the other hand, investors are closely watching the nominations for Bank of Japan Governor Haruhiko Kuroda’s successor for further guidance over the Japanese Yen. In the short-term, the EUR/JPY is in an inventory adjustment phase, with the 20-period Exponential Moving Average indicating a bullish trend. The Relative Strength Index (RSI) has also entered the bullish range, suggesting the possibility of an upside momentum.
For an upward move, the cross needs to surpass the January 25 high of 142.29, which will drive the asset towards the January 11 high at 142.61 and the October 24 low at 143.72. On the other hand, a break below the February 7 low of 140.30 will result in the asset moving towards the January 17 high at 139.62 and the January 13 low around 138.00.
In conclusion, the EUR/JPY pair is expected to experience further volatility in the near-term, depending on the outcome of the ECB and BoJ monetary policies. Investors should keep a close watch on the economic indicators and central bank decisions to have a clear understanding of the asset’s near-term behavior. As with any investment, it’s crucial to have a well-thought-out strategy and to limit risk exposure, especially in volatile market conditions.