EUR/JPY’s Uphill March Continues Amid Mixed Signals
The Buyers’ March for EUR/JPY to Continue its Ascend
The upcoming week is marked by notable FX option expiries, particularly in the USD/JPY pair, which can have indirect repercussions on EUR/JPY through cross-currency effects. Significant strike expiries include:
Monday and Tuesday: 151.50 in USD/JPY with $1.2-billion.
Wednesday: 151.50 in USD/JPY with $948-million.
Thursday: 151.00-05 in USD/JPY with $2.2-billion and 152.00 with $1.25-billion.
Friday: 151.00 in USD/JPY with $700-million.
Such sizable expiries can act as gravitational points for the USD/JPY price action, potentially impacting the broader market sentiment and indirectly influencing EUR/JPY through the mechanics of the forex market’s interconnectedness.
Impact of Carry Trades and Yen Positions:
The recent data from the CFTC regarding yen futures shows a significant increase in non-commercial short positions on the yen, reaching their highest since December 2023. This trend underscores a growing appetite for carry trades, fueled by the low volatility and the widening yield differential between the dollar and yen. Such dynamics could further underpin the EUR/JPY’s bullish outlook, assuming the euro maintains its ground against the dollar.
Market Sentiment and Monetary Policy Expectations:
The anticipation of the U.S. inflation data release on Wednesday and the European Central Bank’s (ECB) policy meeting on Thursday adds layers of complexity to the EUR/JPY’s forecast. The ECB’s cautious stance, with expectations to hold rates steady while hinting at a potential rate cut in June, may influence the euro’s strength against its counterparts, including the yen.
Main Technical Scenario:
In the hourly chart, EUR/JPY has been sculpting higher highs and lows, establishing a clear uptrend above its moving averages. Buyers appear to be in a concerted effort to maintain the support at 164.434, eyeing the peak at 164.553 to perpetuate the bullish narrative. Should this momentum sustain, with the price consistently closing above this pivotal level, it could set sights on 164.704 and potentially 164.871 as subsequent targets for the buyers.
Oscillators Confirmation:
– RSI: Bullish
– MACD: Bullish
– Moving Averages: Bullish
The oscillator indicators align with the bullish sentiment, providing a green light for potential upward movement. However, traders should stay alert to the upcoming economic events that could sway the market sentiment swiftly.
Alternative Scenario:
Conversely, a resurgence of sellers breaking through the support at 164.434 could push the price towards the 164.267 level, near the 34-period moving average. A breach of this area would signal a bearish turn, targeting the lower support at 163.997.
Influential Events:
The impending U.S. inflation report and Japan’s producer price index (PPI) data on Wednesday, followed by the European Central Bank’s (ECB) meeting on Thursday, stand as critical events this week. These could potentially inject a fresh wave of volatility into the pair, influencing the EUR/JPY’s trajectory significantly. In sum, while the primary technical analysis paints a bullish scenario for EUR/JPY, traders must remain vigilant of the broader market context.
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