Piece Written By Mfanafuthi Mhlongo, Trive Financial Market Analyst 

The EURJPY pair resumed its upward trajectory, settling above the 156.300 level on Tuesday after a brief time correction. The cross appears poised to surpass its weekly high of 157.287 as recent Eurozone economic data strengthened the case for the European Central Bank (ECB) to maintain its tightening stance. 

Despite ECB President Christine Lagarde’s data-dependent approach, the recent Eurozone GDP and inflation data indicate that the ECB is unlikely to pause its current tightening measures. Economic activities in the region grew by 0.3% in Q2, beating expectations of a 0.2% expansion, and annualized GDP expanded by 0.6%, surpassing estimates of 0.4%. This suggests that the ECB may need to keep tightening monetary policy in order to bring inflation under control. 

Meanwhile, the Japanese Yen faces challenges due to the Bank of Japan’s policy shift, introducing more flexibility to Yield Curve Control (YCC) and signalling a potential exit from ultra-dovish policies. With the EUR displaying strength and the JPY grappling with policy changes, this could likely see continued upward momentum. 

Technical 

The 4H chart shows that the cross has recovered well from the bearish pressure that helped the pair reach a seven-week low, with a push above the 50-EMA (blue line) likely signalling the potential for further upside in the short term. Therefore, should the price action sustain a push above the 50-EMA, short-term trading opportunities could exist towards the 158.045 resistance level. A break above the level of significant volume would leave the 159.570 within the bulls’ reach in the upcoming sessions. 

For the downside, the market could keep a keen eye on the 23.60% Fibonacci retracement level at the 155.930 support level as a level of interest in the near term. A break below the level could trigger a run to lower levels, likely bringing the 61.80% Fibonacci retracement level at 153.681 and the 151.433 support level into play. 

Summary 

The currency pair remains under bullish momentum, with the price action recently breaking above the 50-EMA. Therefore the market could look for opportunities towards the 158.045 and 159.570 resistance levels should the 23.60% Fibonacci retracement level at 155.930 remain intact.  

Sources: TradingView, Trading Economics, Reuters