The EUR/JPY currency pair is experiencing significant selling pressure for the second consecutive day, with recent activity pushing it to a low not seen in over a month, around the 159.75 level during the Asian trading session. Although there was a slight rebound that brought prices back to just below the mid-160.00 range, the pair is still down over 0.40% for the day.
The Japanese Yen’s strength is primarily fueled by increasing speculation about an upcoming interest rate hike by the Bank of Japan, which is anticipated to occur next week. In contrast, the EURO is facing headwinds as markets price in the potential for additional interest rate cuts by the European Central Bank, adding further pressure on the EUR/JPY exchange rate. However, the presence of a risk-on sentiment in the market limits the JPY’s gains, providing some support for the EUR/JPY prices.
From a technical standpoint, the persistent failures around the 164.70 to 164.80 range, which aligns with the 200-day Simple Moving Average, indicate a bearish trend formation. Sustaining movement below the 161.00 threshold, along with negative signals from technical oscillators, points to a bearish outlook for the EUR/JPY pair.
In this context, any potential recovery could entice new sellers, possibly capping the pair near the psychological 161.00 level. Conversely, any continuity in buying pressure may trigger a short-covering rally, potentially allowing the pair to rise towards the 161.65 level, although momentum could quickly wane around the 162.00 area.
If the prices settle below the significant 160.00 level, it may lead to a downturn below the 159.75 swing low recorded in the Asian session. This could open the door for tests against lower levels, including the 158.55 to 158.50 zone, and even stretch towards the 158.05 to 158.00 area. Bearish traders may ultimately aim for the December 2024 low around 156.20 to 156.15 with some support anticipated at the 157.00 level.
