- EUR/JPY is poised to gain support following dovish comments from the ECB, amid a stronger yen.
- De Guindos of the ECB was aggressive and said a rate hike in July is possible.
- EUR/JPY Price Forecast: Negative Divergence on the daily chart to push the pair towards 137.50.
The shared currency is holding on to gains in the mid American session after posting a yearly high at 140.00. At the time of writing this article, the EUR/JPY trades at 139.06, up 0.24%.
The Japanese yen recovered substantial ground against commodity currencies such as the Australian dollar, Canadian dollar and Kiwi. In the case of the underperforming euro, it flopped, following aggressive comments from ECB Vice President Luis de Guindos, who said a rate hike in July is possible, though he sees no reason why APP cannot finish July.
market reaction
EUR/USD rallied on those comments but recently pared those gains and flirted around 1.0850. In the case of EUR/JPY, the central bank divergence between the ECB and the Bank of Japan (BoJ) favors the former, which is about to end its QE program, while the latter continues to stimulate the Japanese economy. Therefore, the EUR/JPY maintained gains, although from a technical perspective, it is forming an inverted hammer after an uptrend, which means that the price is exhausted and may consolidate or resume lower.
EUR/JPY Price Forecast: Technical Outlook
As mentioned above, exhaustion is in the EUR/JPY pair. If EUR/JPY bulls fail to post a daily close above 139.00, that will put additional downward pressure on the cross. Additionally, the Relative Strength Index (RSI) in overbought territory (72.34) formed a negative divergence with price action as EUR/JPY posts higher highs and RSI lower highs.
That said, the first support for the EUR/JPY would be the psychological level 138.00. A break would expose the February 2018 highs near 137.50, followed by the April 19 daily low at 136.83.
Source: Fx Street
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