EUR/JPY: Bears may cheer drop in the EZ inflation expectations

EZ inflation expectations hit lowest since November.
Yield differential drops in the JPY positive manner.
EUR/JPY may drop below 130.00.

Omkar Godbole FXStreet Contributor

The common currency may remain under pressure against its Japanese counterpart, courtesy of falling inflation expectations.

Currently, the Eurozone inflation expectations, as measured by the 5y5y swaps, stands at 1.68 percent- the lowest level since November. The decline will likely keep the bond yields across the Eurozone under pressure.

Meanwhile, the 10-year German-Japan government bond yield spread continues to drop in the Euro-negative manner. As of writing, the spread stands at 54 basis points vs. recent high of 70 basis points seen on Feb. 15.

So, the EUR/JPY risks falling below 130.00 in the short-run. The sell-off will likely gather pace if the Fed sounds hawkish, driving the treasury yields higher and equities lower (positive for Yen).

EUR/JPY Technical Levels

A close above the 200-day MA of 131.74 would restore bullish view and allow a stronger rally to 132.44 (March 13 high) and 133.14 (50-day MA). On the downside, breach of support at 130.34 (previous day's low) could yield a sell-off to 129.61 (Monday's low) and 129.35 (March 5 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bullish	Neutral	Low
1H	Bearish	Oversold	Shrinking
4H	Bearish	Neutral	Expanding
1D	Bearish	Neutral	Shrinking
1W	Bearish	Neutral	High
Updated Mar 21, 00:30 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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