Piece written by Alexa Smith, Trive Financial Market Analyst  

The EURJPY currency pair received a boost from deliberations regarding the colossal reservoir of surplus liquidity within the banking sector, which has been tempering with the efficacy of the ECB’s interest rate hikes.  

However, there remains an element of scepticism regarding whether these developments will transpire and bolster the Euro as a result. While the ECB’s reported plans to tighten excess liquidity have lent support to the Euro, they may not be sufficient to reverse the current weakening trend. 

Meanwhile, the Bank of Japan (BOJ) is preparing to convene for discussions on monetary policy this Friday. Market expectations are inclined towards the BOJ maintaining its ultra-loose monetary policy and reaffirming its commitment to stimulus, but there is an element of hawkishness Governor Kazuo Ueda who has stoked speculation regarding a possible departure from the central bank’s existing policy stance. 

Técnicos 

The EURJPY currency pair has been consolidating on conflicting signals from the ECB and BoJ. The interest rate hike from the ECB failed to ignite upside momentum due to woeful macroeconomic indicators in Europe conflicting with a strengthening Japanese economy. As a result, the price action met with resistance at 159.774, which could pose a significant barrier to an uptrend. 

However, Japan’s ultra-loose monetary policy has resulted in a capped downside, with the price action falling short of the 156.787 support at the 38.20% Fibonacci Retracement level four times.   Since the currency pair now sits at the 100-day moving average, a move higher may mark the beginning of an uptrend if the price action crosses over the 159.774 resistance. However, the 100-day moving average could hold and bolster the currency pair to retest the 156.787 support.  

Resumen 

The EURJPY currency pair is consolidating due to conflicting signals from the ECB and BoJ. Since the BoJ is convening this week, an element of hawkishness or a boost in stimulus could drive the price action towards the 156.787 support. However, discussions surrounding liquidity within the banking sector could bolster the currency pair towards the 159.774 resistance if a breakout from the 100-day moving average is encouraged.  

Sources: TradingView, Reuters