EUR/JPY just saw another dip after speculations of a hawkish shift in the BOJ’s policies boosted the Japanese yen across the board.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the euro and the Japanese yen, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
Earlier today, reports of the Bank of Japan (BOJ) having permission from the government to exit its negative interest rate policies (NIRP) circulated in the markets. One of the largest labor groups also shared that a number of its member unions have had their wage demands met a week before the end of the annual wage talks.
Higher wages would support the BOJ exiting its NIRP, which is probably why the Japanese yen made pips rain against its major counterparts.
Meanwhile, the euro has started intraweek downswings against some of its major counterparts ahead of the European Central Bank’s (ECB) potentially dovish policy decision.
EUR/JPY 4-hour Forex Chart by TradingView
EUR/JPY, which got rejected for a second time at the 163.50 area, turned even lower and is trading just under the 162.00 psychological handle.
That’s just above the S1 (161.94) Pivot Point line in the 4-hour time frame! Not only that, but EUR/JPY’s current prices are also near a trend line support that’s been around since the second half of December 2023.
Can EUR/JPY still extend its uptrend?
A clear bounce from the trend line opens up the possibility of a retest of the 161.50 previous highs if not the R2 (161.75) Pivot Point line or even new monthly highs.
If today’s themes lead to the yen extending its upswing or the euro dropping even lower, however, then EUR/JPY just might break its uptrend.
Look out for consistent trading below the trend line or the 200 SMA area. A technical breakout, combined with a fundamental catalyst, could take EUR/JPY down to the S2 (160.67) area of interest if not the 160.00 major psychological handle.
