14 Jan 2025

EUR/JPY experiences continued upward momentum, recovering from a recent one-month low. Uncertainty surrounding the Bank of Japan's interest rate decisions, coupled with a risk-on sentiment, exerts downward pressure on the Japanese yen, thereby bolstering spot prices. Conversely, the European Central Bank's dovish stance may deter Euro bulls from making new investments, potentially limiting further gains.

The EUR/JPY currency pair continues to build on its overnight recovery from the psychological level of 160.00, which represents a nearly one-month low, and is attracting additional buyers on Tuesday. During the first half of the European trading session, spot prices maintain a positive trend, currently fluctuating around the 161.75-161.80 range, reflecting an increase of approximately 0.45% for the day.

In light of the prevailing uncertainty regarding the timing of the next interest rate hike by the Bank of Japan (BoJ), the risk-on sentiment is exerting downward pressure on the safe-haven Japanese Yen (JPY), thereby providing support to the EUR/JPY pair. Additionally, a slight decline in the US Dollar (USD) is advantageous for the Euro, further contributing to the upward movement observed intraday. However, it is important to note that the dovish stance of the European Central Bank (ECB) may limit the Euro's potential and, consequently, the performance of the currency pair.

From a technical perspective, strength beyond the 50-hour Simple Moving Average (SMA) and the 38.2% Fibonacci retracement level of the downfall witnessed over the past week or so favors bullish traders. Moreover, positive oscillators on the 1-hour chart support prospects for additional intraday gains. Hence, a move beyond the 162.00 mark, towards testing the 100-hour SMA and the 50% Fibo. level confluence near the 162.25 area, looks like a distinct possibility. 

On the flip side, weakness below the 161.50 area, or the 50-hour SMA, could be seen as a buying opportunity and remain limited near the 161.00 round-figure mark (23.6% Fibo. level). A convincing break below the latter could make the EUR/JPY cross vulnerable to accelerate the slide back towards the 160.00 mark, with some intermediate support near the 160.60-160.55 region. The downfall could extend further towards the 159.50 support zone.