EUR/JPY plunges ahead of ECB decision

• The EUR/JPY pair is trading at 140.68, 2.34% below the previous close.
• The pair is trading between 140.61 and 144.98 during the Wednesday session.
• Key short-term events: Japan’s trade balance/exports/imports and ECB rate decision.

Daily price movements:

He USD/JPY experiences a strong intraday bearish move on Wednesday and trades slightly above the intraday low of 140.61 – spectacularly below the intraday high of 144.98. The general variation of intraday prices stands at -2.34% at the close of this edition.

Main economic events:

Fears of contagion within the European banking sector are driving the euro to fall sharply, after news on Wednesday that Credit Suisse’s biggest investor has withdrawn its support for the Swiss lender.

This unexpected development, which follows the demise of Silicon Valley Bank over the weekend, suggests that the European Central Bank (ECB) could be more accommodative at its monetary policy meeting on Thursday, March 16.

Economists previously expected the central bank to raise interest rates by 50 basis points (bp) at the meeting to combat the effects of persistent inflation, however, given the risks this could cause to liquidity within the banking sector. , central bankers are more likely to opt for a minor rate hike or none at all.

This is the cause of the current strong selling of the euro, as higher interest rates tend to support currencies and lower ones to weaken them. This is due to the effect of the carry-trade, in which global investors borrow in a currency with a low interest rate to buy a currency with a high interest rate.

Earlier, economists at Germany’s Commerzbank raised the risks of contagion to the euro in a recent note from their analysts: “From a market perspective, the ECB has unexpectedly emerged as one of the most aggressive central banks, which could underpin the euro as long as there are no contagion effects in the European banking sector”.

It is also essential for yen traders to closely monitor Japan’s Exports/Imports/Merchandise Trade Balance (23:50 GMT) on Wednesday. For its part, the Publication of the ECB Monetary Policy Decision is scheduled for Thursday at 13:15 GMT.

Technical vision:

The EUR/JPY pair is falling hard, and has been trading below its 20-day SMA (143.94) and 50 daily SMA (142.12), which indicates a bearish trend in the short and medium term. The cross also fell below the 38.2% Fibonacci level at 143.69 and the 61.8% Fibonacci level at 143.25, suggesting more bearish pressure.

The RSI (14 ) daily in 38,974 indicates bearish momentum as the pair trades below the 50 mark. However, the market could find some resistance as daily resistance levels are 144.80, 145.54 and 146.67.

He pivot point daily for the EUR/JPY pair is at 143.66, which is significantly above the last intraday price at press time. Daily support levels are found at 142.92, 141.79 and 141.04. If the pair manages to break above the pivot point, it could test resistance levels, while a break below the pivot point could trigger a test of support levels.