- EUR/JPY dropped recently after the ECB reiterated its bearish bias.
- Trade/Brexit uncertainties keep the Japanese Yen (JPY) comparatively stronger despite BOJ’s easy money policy.
Although trade/Brexit headlines favor the JPY, EUR/JPY struggles around 120.60 during early Friday.
The pair declined on Thursday after the European Central Bank (ECB) held its support for the easy money policy citing weaker growth momentum and softer labor market.
Also in favor of the pair’s declines were the market’s rush for risk safety amid the calls of snap election from the United Kingdom (UK) and the United States’ (US) criticism of China’s human rights records, not to forget the US support for Hong Kong protesters.
Reuters’ poll of analysts showing weaker growth expectations and the International Monetary Fund’s (IMF) pessimism could be considered as additional support to the JPY.
However, rising odds of no change in current monetary policy during next week’s Bank of Japan (BOJ) meeting and an absence of catalysts during the Asian session seems to limit the pair’s moves.
Moving on, October month numbers of IFO – Business Climate, Current Assessment, and Expectations from Germany will provide immediate direction to the pair. While Business Climate and Current Assessment are likely to have weakened to 94.5 and 98.0 from 94.6 and 98.5 respectively, Expectations bear upbeat market consensus of 91.0 versus 90.8 prior.
Technical Analysis
FXStreet Analyst Ross J Burland spots the pair’s failure to hold upside break of the key trend-line while citing the bears’ control over the momentum:
“EUR/JPY has been under pressure again with the 23rd Oct upside correction stalling below the previous swing highs around 121.50, with the downside bias supported by the 4-hour bearish pin-bar posted earlier on in the week – Indeed, this is a 50% Fibonacci level which is proving to be a tough nut to crack on the upside, a resistance area that is hardened with confluence of the 2018-2019 downtrend. Also worth noting are the Fibonacci levels of between the early Sep’ lows to recent swing highs of Oct’ which can be located at 120.15, as the 23.6% retracement (meeting 12th Sep resistance), 119.33 as the 38.2% and 118.66 as a 50% mean reversion target.”
Share
