EURJPY Technical Outlook and ECB Economic Projections

<p>The strengthening of <strong>EURJPY</strong> is a combination of the EUR expansion and a weakening of the JPY together, however, it seems that this move is largely driven by the EUR, given that the EURUSD moved sharply higher through June while the USDJPY was relatively stable.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/EJ.jpg"><img class="size-large wp-image-149541 aligncenter" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/EJ-1024×461.jpg" alt="" width="696" height="313" srcset="/wp-content/uploads/2020/07/EJ-1024×461.jpg 1024w, /wp-content/uploads/2020/07/EJ-300×135.jpg 300w, /wp-content/uploads/2020/07/EJ-768×346.jpg 768w, /wp-content/uploads/2020/07/EJ-696×313.jpg 696w, /wp-content/uploads/2020/07/EJ-1068×481.jpg 1068w, /wp-content/uploads/2020/07/EJ-933×420.jpg 933w, /wp-content/uploads/2020/07/EJ.jpg 1366w" sizes="(max-width: 696px) 100vw, 696px" /></a></p>
<p>The Yen is currently trading at the same level as the US Dollar as it did in early May. <strong>USDJPY</strong> started trading at 107 in May, compared to the recent closing price of <strong>106.90.</strong> Meanwhile, the <strong>EURUSD</strong> remains significantly higher, the May opening price at <strong>1.0950</strong> compared to the recent close of <strong>1.1300.</strong></p>
<p>In general, <strong>expansionary monetary policy usually softens the value of a currency</strong> in the short term , because an increase in liquidity or an increase in the money supply, usually reduce funding costs. However, macroeconomic, performance differences and separately the demand for mechanical changes, such as repatriation of capital and changes in global risk sentiments and collective assessment of regional political and economic risks (trusts) are responsible for the larger, long-term movement.</p>
<p>But the current conditions are different, as we are currently experiencing in the midst of a pandemic and economic turmoil, the market seems to have lost interest in short-term pricing. As you know, in mid-May, there was a speculation that the European Central Bank will expand the Pandemic Emergency Purchasing Program by 500 billion euros, in early June the figure was confirmed as 600 billion euros and at the European summit this week there was a proposed expansion of the proposed program which is the proposed €750bn Recovery Fund. <strong>Events like this have fueled sentiment towards the recovery of the euro exchange rate in recent months.</strong></p>
<p>The <strong>ECB</strong> has updated its economic projections, projecting the Eurozone economy to contract -8.7% in 2020. Changes that are significantly different from previous estimates for real GDP growth + 0.8% before, in March 2020. It seems that initial speculation for an increase <strong>ECB</strong> intervention, combined with validation in June, helped the EUR to move higher on the back of easing Eurozone pessimism.</p>
<p>The strengthening of the Euro against the Yen is an indication of the risk-on mode. The FX market, however, seems calm, with cross-risk FX classics such as <strong>USDJPY</strong> and <strong>AUDJPY</strong> now trading fairly stable in line with the beginning of Q1 2020.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/EJ-1.jpg"><img class="alignnone size-large wp-image-149673" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/EJ-1-1024×498.jpg" alt="" width="696" height="338" srcset="/wp-content/uploads/2020/07/EJ-1-1024×498.jpg 1024w, /wp-content/uploads/2020/07/EJ-1-300×146.jpg 300w, /wp-content/uploads/2020/07/EJ-1-768×373.jpg 768w, /wp-content/uploads/2020/07/EJ-1-696×338.jpg 696w, /wp-content/uploads/2020/07/EJ-1-1068×519.jpg 1068w, /wp-content/uploads/2020/07/EJ-1-864×420.jpg 864w, /wp-content/uploads/2020/07/EJ-1.jpg 1366w" sizes="(max-width: 696px) 100vw, 696px" /></a></p>
<p>In the rally of the <strong>EURJPY</strong> pair from the low price of <strong>114.42</strong> to <strong>124.42,</strong> it has been noticed a retracement of 50.0%. Prices temporarily move in a narrow range above the 200-EMA, with the indication of the MACD in the OS zone. The ascending triangle trendline, implies a Support level at <strong>119.30.</strong> Nearest minor Support at the price of <strong>120.25, which if</strong> breaks it could retest the key Support level at <strong>119.30.</strong> On the upside, the closest Resistance is <strong>121.11</strong> and the <strong>121.96.</strong></p>
<p>Breakout of the 121.96 level could retest the high level of <strong>124.20,</strong> otherwise a breakout of the low <strong>119.30</strong> could usher in a decline in the test price of <strong>118.00.</strong></p>
<p><strong>Click </strong><a href="https://www.hotforex.com/en/trading-tools/economic-calendar.html"><strong>here</strong></a><strong> to access the Economic Calendar</strong></p>
<p><strong>Ady Phangestu</strong></p>
<p><strong>Market Analyst – HF Educational Office – Indonesia</strong></p>
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