The EUR/JPY pair is trading in the green, up by 0.48%, despite weaker-than-expected ZEW data from the Eurozone and Germany. The pair has been buoyed by the strength of the USD/JPY pair, which has been driven higher by positive US Retail Sales figures. The USD/JPY pair expanded by 0.1% MoM in August, exceeding estimates of a -0.2% contraction. However, there are no clear indications of the Federal Reserve’s rate cut size ahead of the FOMC meeting.
European Central Bank (ECB) Member Gediminas Simkus dismissed the possibility of a rate cut in October, suggesting that the economy is developing as foreseen. On the other hand, analysts speculate that the Bank of Japan (BoJ) could raise rates to 0.50% by the end of the year. This divergence in monetary policy outlooks could impact the EUR/JPY pair in the near term.
Despite the positive data from the US and the dismissive comments from ECB Member Simkus, the EU ZEW Survey of Expectations dipped to an eleven-month low in September. This marks the third consecutive month of deterioration in expectations amid ongoing uncertainty about the economic outlook and monetary policy direction. The market reaction to these contrasting factors will likely shape the near-term direction of the EUR/JPY pair.
In terms of technical analysis, the EUR/JPY pair has cleared the Tenkan-Sen at 157.46 and aims to challenge the Senkou Spa A at 158.49. To reach these levels, the pair must first reclaim 158.00. On the downside, if the pair weakens, it could retest the latest trough at 155.14, the September 16 daily low. The upcoming FOMC meeting could also impact both currencies, depending on the Fed’s decision and its effect on the market sentiment.
Overall, the EUR/JPY pair’s movement is influenced by a combination of factors, including US Retail Sales data, ECB and BoJ monetary policy outlooks, and market sentiment. Traders and investors should pay close attention to these developments, as they could provide insights into the future direction of the pair. The ongoing uncertainty surrounding economic conditions and monetary policies in both regions adds to the unpredictability of the currency pair, making it essential to stay informed and adapt to changing market conditions.
