- The EUR / JPY remains stuck within the same 126.00-127.00 range that it has been trapped in since early December.
- The pair is likely to continue to gain momentum from the unfolding Covid-19 situation and other global issues.
Since breaking above a key resistance area around 125.00 in early December 2020, the EUR/JPY has been trapped within a range of 126.00-127.00. Price action so far in 2021 has confirmed that this is still the case; The pair found solid support just before the 126.00 level during the early part of the US session and has since moved back to around 126.30. On the day, the pair is trading flat.
Looking ahead, preliminary Eurozone CPI figures for December will steal the limelight for the pair on Thursday and are likely to show a still deflated Eurozone (for the sixth month in a row). Meanwhile, Thursday’s general household spending figures and Friday’s leading economic index outside of Japan will pay off for JPY traders. However, the global dynamics of risk appetite are likely to remain the main factor driving the pair.
The euro zone and Japan are affected by the pandemic
Both the euro zone and Japan continue to fight to contain the Covid-19 pandemic. Germany this week announced an extension of its strict national lockdown until the end of the month, while most of the rest of the euro zone continues with varying degrees of lockdown, and Japan is set to announce a state of emergency on Thursday. The Japanese government is also said to be considering stopping all foreign arrivals and pausing business trips with South Korea and China.
While economic activity in the short term will remain under pressure from the high prevalence of the virus and lockdown restrictions in both regions, the euro zone has an advantage over Japan when it comes to vaccination; the euro zone began administering the Pfizer / BioNTech vaccine in late December, while Japanese Prime Minister Yoshida Suga said on Monday that the vaccine would not be available in Japan until the end of February.
Oscillating in the range
A break below the low of the recent EUR / JPY range at 1.2570-1.2600 would open the door for a pullback towards a test of the October and November 2020 highs around 125.00. Conversely, a break above the recent highs just above the 127.00 level would open the door for a bullish move towards two-year highs above 128.00.
12 hour chart