The Euro rose against the Japanese Yen by 0.80% on Thursday due to a positive market sentiment that put pressure on safe-haven currencies such as the Yen and Swiss Franc. ECB officials were divided on the possibility of further rate cuts, with Klas Knot suggesting room for cuts while Isabel Schnabel cited sticky services inflation in the Eurozone. Meanwhile, the Bank of Japan is expected to maintain its current rates, but Governor Ueda hinted at potential future hikes if the economy meets expectations.
The risk-on sentiment in the market boosted the EUR/JPY pair, along with comments from ECB members and the rise of the USD/JPY pair. Klas Knot’s suggestion of further rate cuts aligned with market expectations, while Schnabel’s concerns about inflation in the Eurozone posed a challenge to easing. Despite the divided opinions within the ECB, the overall mood in the market favored the Euro against the Yen.
The Bank of Japan is expected to keep rates unchanged but may adjust its quantitative easing policy. Governor Ueda’s comments hinting at future rate hikes if economic conditions improve were supported by other BoJ members. The possibility of tightening monetary policy further to stimulate capex, wages, and prices in firms suggests a potential rate increase in the future.
In terms of technical analysis, the EUR/JPY pair remains bearish, trading below the Ichimoku Cloud and the 200-day moving average. Despite a spike towards 160.00, the pair failed to stay above the Kijun-Sen at 159.51, indicating a possible pullback. A drop below 159.00 could lead to further support levels at 158.53 and 158.00 before reaching 157.55. On the other hand, a break above 160.00 could signal a test of the Kumo bottom at 161.90-162.00.
Overall, the EUR/JPY pair saw gains due to a positive market sentiment that favored risk-on assets and put pressure on safe-haven currencies. The division within the ECB regarding further rate cuts and the Bank of Japan’s potential future rate hikes added to the volatility in the FX space. Technical analysis suggests a bearish outlook for the EUR/JPY pair, with key support and resistance levels to watch for in the coming sessions.
