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EUR/JPY TECHNICAL ANALYSIS
EUR/JPY regained lost ground last week after bouncing off trendline support and the 200-day simple moving average, but its recovery stalled when prices failed to clear a major ceiling around the 158.75 mark, a rejection that triggered a modest pullback in recent sessions.
While the longer-term outlook for the pair remains constructive, prolonged trading below 158.75 could signal an exhaustion of upside momentum, a condition that could usher in a move towards 156.75. Continued weakness might prompt a revisit of the 155.40 region.
In the event of a bullish reversal, overhead resistance looms at 158.75, as noted above. For bullish impetus to resurface, this technical zone must be taken out decisively, with this scenario poised to trigger a rally towards the 160.00 handle. On further strength, the focus turns to 161.25.
EUR/JPY TECHNICAL CHART
EUR/JPY Chart Created Using TradingView
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| Change in | Longs | Shorts | OI |
| Daily | 0% | -3% | -2% |
| Weekly | -28% | 70% | 29% |
GBP/JPY TECHNICAL ANALYSIS
GBP/JPY staged a strong rally and climbed nearly 2.5% last week, but bullish momentum has started to wane over the past few days after an unsuccessful attempt at overtaking cluster resistance around the psychological 184.00 level, as shown in the daily chart below.
It is still uncertain whether the 184.00 ceiling can contain bullish progress for much longer, but if it does, sellers are likely to slowly reemerge, paving the way for a retracement towards the 181.00 handle. Below this floor, all eyes will be on the 200-day simple moving average near 180.00.
Conversely, if the bulls retake decisive control of the market and manage to propel prices past the 184.00 handle, the next critical resistance to watch is positioned around 186.75. Successfully piloting above this barrier could open the door to a retest of the 2023 highs.
GBP/JPY TECHNICAL CHART
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As the global economy continues to navigate the ongoing effects of the COVID-19 pandemic, major currency pairs such as EUR/JPY and GBP/JPY have recently hit some roadblocks in their respective trajectories. This has left many investors and traders wondering what the future holds for these popular currency pairs. In this article, we will take a closer look at the recent performance of EUR/JPY and GBP/JPY and discuss what could be next for these currencies.
EUR/JPY – Struggling Against the Strength of the Yen
The EUR/JPY pair has seen a significant decline in value since late February, where it reached a high of 130.60. Since then, the pair has steadily decreased, with current levels sitting below 128. Factors such as the ongoing rise in COVID-19 cases in Europe, leading to renewed lockdown measures, have weighed on the Euro. Additionally, the recent strength of the Japanese Yen, which is typically seen as a safe-haven currency during times of uncertainty, has also played a role in the decline of EUR/JPY.
As we move forward, a key factor to watch for EUR/JPY will be the European Central Bank’s monetary policy decisions. The ECB has recently signaled a willingness to increase its bond-buying program, which could cushion the Euro’s continued decline against the Yen. However, if the pandemic’s effects on the European economy persist, the Euro could continue to face headwinds against the stronger Yen.
GBP/JPY – Still Feeling the Effects of Brexit
Similar to EUR/JPY, GBP/JPY has also seen a downward trajectory since late February, falling from a high of 150.00 to current levels around 149. The primary driver for this decline has been the uncertainty surrounding the UK’s departure from the European Union, also known as Brexit. With the end of the transition period approaching on December 31st, many questions still remain about the future of the UK’s relationship with the EU, and this has led to continued volatility in the Pound.
In addition to Brexit, the resurgence of COVID-19 cases in the UK and the country’s struggle to contain the virus have also contributed to the decline in GBP/JPY. Looking ahead, the next few months will be crucial for GBP/JPY as the UK and the EU try to reach a trade deal before the end of the transition period. Any positive developments on that front could lead to a recovery for the Pound against the Yen.
What’s Next for These Currencies?
In the short term, EUR/JPY and GBP/JPY could continue to face pressure from the ongoing COVID-19 pandemic and its economic impact. However, in the longer term, there are several factors that could impact the future performance of these currency pairs.
First, as the world moves towards a post-pandemic phase, the global economy may see a recovery, which could benefit riskier currencies like the Euro and Pound and lead to a gradual appreciation against the Japanese Yen. Additionally, the ongoing rollout of vaccines could help to improve investor sentiment, which is essential for the strength of the EUR/JPY and GBP/JPY.
On the other hand, if the pandemic proves to be more prolonged and severe than expected, then we could see further downside for both the Euro and the Pound in the short term. Moreover, any setbacks or difficulties in dealing with the virus in the coming months could also adversely affect EUR/JPY and GBP/JPY.
Practical Tips for Traders
Whether you are an experienced trader or just starting, understanding the dynamics of these currency pairs and their correlation with current events is crucial. Here are some practical tips that may help your trading strategy:
– Keep an eye on the upcoming monetary policy decisions of the European Central Bank and the Bank of England, as they are important drivers of the Euro and the Pound.
– Stay informed about developments and updates regarding the ongoing Brexit negotiations.
– Monitor the latest COVID-19 news and its impact on the global economy, as this will continue to be a significant driver for these currency pairs.
– Utilize technical analysis tools to identify key levels and potential entry and exit points for trades.
– Consider diversifying your portfolio with other currencies and assets to mitigate risk and take advantage of potential opportunities.
Conclusion
While EUR/JPY and GBP/JPY have faced some challenges in recent months, it is essential to remember that currency markets are constantly changing. As we look towards the future, we can expect to see continued volatility in these currency pairs, driven by a combination of geopolitical, economic, and health-related factors. By staying informed and using sound trading strategies, traders can navigate these challenges and capitalize on potential opportunities.
