The EUR/JPY currency pair continued its upward momentum, reaching close to 163.05 during early European trading hours on Thursday. This surge is largely attributed to the prevailing risk-on sentiment in global financial markets. Investors are now turning their attention to the Bank of Japan’s (BoJ) interest rate decision, scheduled for Friday, which could provide fresh market drivers.
Market participants are currently pricing in a nearly 90% probability that the BoJ will raise its key interest rate from 0.25% to 0.50% at the conclusion of the January 23-24 meeting, marking the first rate hike since the global financial crisis of 2008.
From a technical standpoint, EUR/JPY maintains a bullish outlook on the 4-hour chart, supported by its position above the critical 100-period Exponential Moving Average (EMA). The pair’s upward trajectory is reinforced by the Relative Strength Index (RSI), which stands at 58.05, signaling further potential for upward movement.
Resistance for the pair is initially found near 163.55, the upper boundary of the Bollinger Bands. Beyond that, the 164.00 psychological level presents a notable hurdle, followed by the January 7 high of 164.55.
On the downside, support for EUR/JPY is situated at 162.32, the high from January 20. A break below this level could pave the way for a decline towards 161.87, the 100-period EMA. Should the bearish momentum continue, the next support level to watch is 160.96, which corresponds to the low from January 21.
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