EUR/JPY: Sellers Target Lower Levels as Downward Pressure Intensifies
Market Overview
The Japanese yen has strengthened against the euro following stronger-than-expected Q4 economic growth in Japan. This has reinforced investor confidence in the yen, particularly as uncertainty surrounding Ukraine peace talks continues to weigh on the euro. Additionally, while the eurozone reported a trade surplus of $15.5 billion, its impact on EUR/JPY has been overshadowed by shifting risk sentiment and the yen’s renewed strength.
Technical Analysis
EUR/JPY has been under selling pressure on the 4-hour chart, failing to sustain recent highs and forming a lower peak at 160.258 compared to the previous week’s top. Sellers have successfully pushed the pair below key moving averages, indicating a bearish momentum shift.
Currently, price is testing the critical support level at 159.006, which, if broken, would confirm a reversal pattern and accelerate the downward move. A sustained close below this level would open the door for further declines towards 158.665, followed by 158.232 and 157.754, which align with extended Fibonacci retracement levels.
Momentum indicators support this bearish outlook. RSI has dropped below 50 from overbought levels, confirming seller dominance. Meanwhile, MACD bars are extending in negative territory, reflecting intensifying downward momentum.
Should sellers fail to maintain control below 159.006, buyers may attempt a recovery towards 159.484 and 160.258, with a breakout above these levels invalidating the current bearish setup.
Key Technical Levels
- Resistance Levels: 159.006, 159.484, 160.258
- Support Levels: 158.665, 158.232, 157.754, 156.980
Fundamental Drivers
Stronger Japanese GDP: Japan’s Q4 economic expansion exceeded expectations, boosting the yen and shifting sentiment in favor of JPY strength.
Geopolitical Risks: Ongoing uncertainty over Ukraine peace talks has kept pressure on the euro, limiting upside potential.
Eurozone Trade Balance: The region recorded a $15.5 billion trade surplus, though its impact on EUR/JPY has been minimal amid broader risk trends.
ECB Commentary: Investors will focus on Bundesbank President Joachim Nagel’s speech, which could provide insights into the ECB’s future monetary policy stance.
Conclusion
EUR/JPY remains under selling pressure, with a potential breakdown below 159.006 paving the way for further declines. If sellers sustain momentum, the next downside targets are 158.665 and 158.232. Conversely, a rebound above 159.484 could invalidate the bearish scenario and shift focus back to resistance levels. Market participants will closely watch ECB commentary and risk sentiment for additional cues.
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