EUR/JPY

While the euro has struggled, the Japanese yen continues to roar back higher. The strengthening yen is a reflection of tightening of bond yield spread between Japan and the rest of the world, after ballooning following the years of excessive expansionary monetary policy in Japan while the rest of the world pursued a sharp contractionary policy to combat surging inflation.

The ECB are likely to perform a widely telegraphed rate cut, odds of a Fed cut have increased and futures traders are becoming increasingly bullish on EUR/USD. Beyond the meeting, the path of least resistance could be higher.

AUD/JPY and EUR/JPY are sandwiched between range highs and uptrend support, meaning traders should be on alert for potential bearish and bullish breakout this week with big event risk in the United States and Europe approaching fast.

The long-awaited results from the Japan’s spring wage negotiations are winding down, and the results are generally what the BOJ wanted to see to exit its ultra-accommodative monetary policy. See the key levels to watch on USD/JPY, EUR/JPY, and GBP/JPY!

USD/JPY is consolidating while EUR/JPY and GBP/JPY remain in healthy uptrends.

Look no further than relative central bank interest rate expectations if you’re wondering what’s driving USD/JPY right now. The pair is moving in lockstep with US two-year Treasury note yields, running with a positive correlation of 0.96 on the daily over the past month.

Yen weakness has come rushing back in early-2024 trade, but U.S. and U.K. CPI could provide a jolt to FX trends in USD and GBP, which could produce some change in both USD/JPY and GBP/JPY.

EUR/JPY sits near two-month highs heading into the BOJ and ECB interest rate decisions, consolidating after a strong rally that saw the pair add nearly eight big figures from the lows of December.

Asian equity markets were lower following China's trade data, yet US yields and the dollar pulled back to help AUD/USD hold above its cycle lows. I continue to suspect EUR/JPY has topped out on the daily chart, and today highlight a potential short setup beneath a resistance zone.

The combination of a verbal BOJ warning shot and relatively dovish comments from an ECB official saw EUR/JPY suffer its worst session in five weeks on Thursday. Given the increased odds that yen weakness is very near (or at) a turning point, I am going to stick my neck on the line and speculate that EUR/JPY has topped for now. We also take a look at the USD/JPY 1hour chart ahead of today’s NFP report.

The Japanese yen continues to weaken amidst quiet trade to start the week...

The market is likely to keep pushing the yen lower in the coming days and weeks until the BOJ takes decisive action to stem the bleeding.

It was a bearish week for EUR/USD after a big spot of resistance came into play on Monday. But ECB and FOMC rate decision next week will likely play a major role as to whether that resistance hit turns into a full on reversal, or remains but a pullback in a broader bullish trend.

The USD/JPY outlook now hinges more on the decision from the Fed than the BoJ. Meanwhile, the EUR/JPY hit a new high for the year above 158.00, before pulling back a touch. The ECB’s decision will be watched closely next week as it has the potential to move the euro crosses sharply, including the EUR/JPY.

The yen has rallied across the board over the last week+, but traders may now look to take profits on USD/JPY, EUR/JPY, and GBP/JPY ahead of the weekend...

Thanks to a hawkish ECB and a still-dovish BoJ, we maintain a bullish longer-term EUR/JPY outlook and reckon 150.00 is not out of reach.