- The EUR/JPY gains land about 172.80 in the first bars of the European session on Friday.
- The crossing maintains a constructive perspective above 100 days, but the RSI overcompra condition could limit its rise.
- The immediate resistance level is observed in 173.25; The initial support level is located in 170.00.
The EUR/JPY crossing gains strength around 172.80 during the early Asian session on Friday. The Japanese yen (JPY) weakens in front of the euro (EUR) in the midst of reducing bets due to a rise in rates of the Bank of Japan (BOJ).
The National Consumer Price Index (CPI) of Japan highlights the challenge facing the BOJ to balance the growing inflationary pressure and risks to the fragile economy due to US tariffs, while considering how soon they resume rates rises from still low levels.
Technically, the constructive perspective of the EUR/JPY is maintained since the crossing is well supported above the average exponential mobile (EMA) key of 100 days in the daily chart. However, the 14 -day relative force index (RSI) is above the midline about 70.50, indicating the RSI overcompra condition. This suggests a neutral impulse, indicating that greater consolidation or temporary sale cannot be ruled out before positioning for any EUR/JPY appreciation in the short term.
On the positive side, the first bullish barrier for the crossing appears in 173.25, the maximum of July 16. Further north, the following obstacle is observed in 173.55, the upper limit of the Bollinger band. A decisive rupture above this level could gain more impulse and point to 174.52, the maximum of July 3, 2024.
On the other hand, the initial support level for the EUR/JPY is located at the psychological level of 170.00. A break of this level could expose 169.04, the minimum of July 2. The additional filter to be monitored is 168.10, the minimum of June 25.
EUR/JPY DAILY GRAPH
Japanese – frequent questions
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
