The EUR/JPY currency pair is experiencing a downward drift, currently trading around 165.75 in the early hours of the European session on Wednesday. Despite this decline, the overall outlook for the pair remains positive, buoyed by a bullish Relative Strength Index (RSI) reading. Resistance is anticipated in the 166.00 – 166.10 range, while the first notable support level is identified at 165.16.
The EURO is facing selling pressure due to market expectations regarding a potential cut in the European Central Bank’s Deposit Facility Rate later this year. This sentiment is impacting the pair and contributing to its recent weakness. However, the longer-term perspective on EUR/JPY continues to show promise, as the currency pair is maintaining its position above crucial indicators such as the 100-period Exponential Moving Average (EMA).
Analysis of the four-hour chart reinforces this positive bias, as the RSI remains comfortably above the midline, positioned near 62.20. This suggests that, for the time being, buyers are still active in the market. The critical resistance level at 166.00 – 166.10, which corresponds to the recent high, is a significant point to monitor. Should the pair manage a breakout above this barrier, it may lead to further gains, potentially reaching around 166.55, as indicated by the upper boundary of the Bollinger Band.
Conversely, if the pair breaches the noted support level at 165.16, it could trigger additional selling pressure. A decline below this level could bring prices down to 164.32, which marks the low from October 26. Traders should also pay attention to the lower limit of the Bollinger Band, currently near 164.06, as another critical area of support in the event of continued downward movement.
