EUR/JPY Price Forecast: Bulls and bears jostle around 200-hour SMA, above mid-162.00s
- EUR/JPY attracts some dip-buyers following an Asian session slide to the 162.00 mark.
- The technical setup warrants caution for bulls and before positioning for further gains.
- A convincing break below the 200-day SMA will be seen as a fresh trigger for bears.
The EUR/JPY cross dropped to the 162.00 mark during the Asian session on Tuesday and eroded a major part of the previous day's gains led by the optimism over the EU tariff delay. Spot prices, however, recover the early lost ground and currently trade just above mid-162.00s, nearly unchanged for the day.
From a technical perspective, oscillators on hourly/daily charts have been struggling to gain positive traction. Moreover, the recent repeated failures near the 200-hour Simple Moving (SMA), currently pegged around the 162.75 region, warrant some caution for the EUR/JPY bulls. Hence, it will be prudent to wait for sustained strength beyond the said barrier before positioning for further gains.
The subsequent move-up will suggest that the recent pullback from the 165.20 area, or the year-to-date high touched earlier this month has run its course and pave the way for further gains. The EUR/JPY cross might then climb further beyond the 163.00 mark and ascend further towards the 163.40-163.45 supply zone en route to the 164.00 round figure.
On the flip side, the 162.00 round figure now seems to protect the immediate downside ahead of the 200-day SMA, around the 161.45 region. A convincing break below the latter might shift the near-term bias in favor of bearish traders and make the EUR/JPY cross vulnerable to retesting Friday's swing low, around the 161.00 round figure. Spot prices could eventually drop to the 160.00 psychological mark.
EUR/JPY 1-hour chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
