EUR/JPY testing 131.90, with YTD high 133.15 on sight

The euro has gone through a sharp rally against the Japanese yen this week. The pair extended its recovery from early March lows at 124.40 to test 131.90 resistance level, with the year-to-date high, at 133.15, on sight.

A dovish BoJ sends the yen plummeting

The common currency is on track to a nearly 3% weekly rally, favored by broad-based yen weakness as the Bank of Japan’s dovish policy stance has helped the euro to retrace most of the ground lost in February.

The Bank of Japan has confirmed its ultra-expansive monetary policy at its latest monetary policy meeting on Friday. The bank pledged to maintain its huge stimulus program in spite of the increasing inflation trends. With most of the world’s major central banks shifting towards monetary tightening, the BoJ's stance is crushing yen demand.

Yen's weakness has been boosting the EUR/JPY to extend its rally for the sixth consecutive day, despite the sourer market mood on the back of the lack of progress on the Russia – Ukraine peace talks, which has increased negative pressure on the euro.

EUR/JPY: Above 131.90, next significant target is YTD high is 133.15

The pair seems to have found some resistance at 131.90 (February 16 high). If that level gives way, the next potential target would be 132.60 (February 11 high) ahead of a retest to the year-to-date high at 133.15.

On the contrary, a bearish reversal below the intra-day low at 131.15 and March 17 low at 130.70 might seek support at the 200=day SMA, at the 130.00 area.

Technical levels to watch