EUR/JPY drifting towards 118.90 near 100-DMA; Draghi vs. Kuroda vs. 'The Gravity'
|Currently, EUR/JPY is trading at 119.79, down -0.89% or (106)-pips on the day, having posted a daily high at 121.09 and low at 119.77.
'Trade War' or 'Currency War' or 'Some War' there is evidence humanity does experience war at one level or another. Since 2016, central bankers navigated deflated and anemic economies via the unknown uncertainty labeled as NIRP (Negative Interest Rate Policies) which, at first sight, seemed behind us; but?
BoJ's Kuroda, sponsored by Japan's PM Abe, should be awarded an Oscar due to his stellar ability to disrupt market perception and expectation over the last 12-months. However, those two are not alone, as ECB's Draghi decided to subjugate to a more passive role, especially after the Brexit 'unexpected surprise', that allowed him to achieved a 1.7% GDP; against all odds.
Both Central Bankers face ongoing structural issues from demographics (Japan), populism (France, Germany, Greece) + rebels (England) and on top of all of them, there is evidence of the common invisible enemy those two figures battle day to day; Gravity. Hence, as long as growth does not return in some sort of form, meaning increasing international trade or consumer demand (almost dried up) or new Quantitative Easing, then the inevitable would take place as the gravity from the negative interest rate phase has the potential to erode any progress achieved so far.
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Historical data available for traders and investors indicates during the last 7-weeks that EUR/JPY cross had the best trading day at +0.94% (Jan.18) or 114-pips, and the worst at -1.05% (Feb.6) or (126)-pips. As of writing, the US 10yr treasury yields fell from 2.46% to 2.42%, down -1.02% on the day or -0.0249.
Technical levels to watch
In terms of technical levels, upside barriers are aligned at 121.87 (50-DMA), then at 123.30 (high Jan.27) and above that at 124.08 (high Dec.15). While supports are aligned at 118.90 (100-DMA), later at 117.70 (200-DMA) and below that at 116.20 (low Nov.17). On the other hand, Stochastic Oscillator (5,3,3) seems truly committed to head south. Therefore, there is evidence to expect further Japanese yen gains in the near term.
On the long-term view, the currency cross continued its healthy and deeper pullback, as of writing, trading (250)-pips below 124.08 short-term top. To the downside, supports are aligned at 118.40 (short-term 61.8% Fib), then at 116.76 (short-term 50% Fib) and below that at 115.00 (short-term 38.2% Fib). On the flipside, upside barriers are aligned at 122.50 (Feb.), later at 123.70 (Jan.) and above that at 124.60 (May).
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