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  • EUR/JPY is neutral to upward biased from a technical perspective, but caution is warranted due to fundamental news.
  • Rumors of the appointment of Kazuo Ueda to be the new Governor at the Bank of Japan spurred speculations of a hawkish stance.
  • Abandonment of the Bank of Japan Yield Curve Control could strengthen the Japanese Yen.

The EUR/JPY bounces from the 200-day Exponential Moving Average (EMA), and advances sharply toward the 142.00 area, breaking crucial resistance areas in the daily chart. However, it trimmed some of those earlier gains but remained above all the EMAs. At the time of writing, the EUR/JPY exchanges hands at 142.02.

From the daily chart perspective, the EUR/JPY is neutral-to-upward biased, though it remains capped by the YTD high at 142.84. A breach of the latter would resume the uptrend,  and the EUR/JPY could rally towards its next supply zone, being a downslope resistance trendline, drawn from October highs that pass around 144.55-70, followed by the December 20 daily high at 145.83.

On the other hand, fundamental news surrounding the Bank of Japan (BoJ) could trigger a downward reaction in the event of an appreciation of the Japanese Yen (JPY). Speculations that Kazuo Ueda, which the Japanese PM Kishida would appoint as the new BoJ Governor, would lean towards a more hawkish stance had increased the likelihood of abandonment of the Yield Curve Control (YCC). Therefore, that would be bullish for the Japanese Yen.

In that event, the EUR/JPY could position itself towards the downside, though it would need to hurdle all the EMAs toward the 200-day EMA at 140.34. Break below, and the cross-currency pair would be exposed to the 137.91 January 19 daily low, ahead of the YTD low at 137.38.

EUR/JPY Daily chart

EUR/JPY Key technical levels

This article was originally published by Fxstreet.com.Read the original article here.