The EUR/JPY currency pair has edged above 158.30, largely influenced by ECB President Christine Lagarde’s hawkish stance on inflation and interest rates. The pair faces resistance at 158.18 and could establish new trading ranges depending on upcoming economic data releases. The Bank of Japan maintains its loose monetary policy, offering a contrasting backdrop.
- EUR/JPY solidifies its stance above the 158.30 level, fueled by the European Central Bank (ECB)’s restrictive monetary outlook.
- ECB President Christine Lagarde commits to stringent rate-setting to steer inflation towards the 2% target.
- Bank of Japan (BoJ) maintains its current accommodative policy amid subdued inflation.
- Investor focus pivots to the impending Eurozone Consumer Price Index (CPI) and ECB meeting minutes slated for Thursday.
Sustained Gains in the Euro-Yen Pair
The EUR/JPY currency pair marked its third consecutive day of gains in Monday’s Asian trading session. Currently trading at around 158.35, the cross has seen a marginal appreciation of 0.17% on the day.
ECB Raises Hawkish Flags at Jackson Hole Symposium
Christine Lagarde, President of the European Central Bank, articulated an unwavering stand on inflation management at the Jackson Hole Symposium. Stressing the essential role of central banks as economic stabilizers, she affirmed that interest rates would remain at restrictive levels to sustain inflation at a 2% medium-term target. Her remarks have elevated market expectations to a 50% chance of another rate hike in the ECB’s September meeting.
Martins Kazaks, a member of the ECB Governing Council, further echoed the sentiment. He cautioned against an untimely pause in rate hikes, emphasizing that such a move could jeopardize future economic stability.
Bank of Japan Maintains Status Quo
On the other side of the currency pair, Governor Kazuo Ueda of the Bank of Japan announced the continuity of the existing monetary policy. In contrast to the ECB’s hawkish trajectory, the BoJ perceives inflation to be still under its intended target.
Critical Data Releases Awaited
The market’s gaze now shifts to key economic data releases due later this week, including German CPI data on Wednesday, and Eurozone CPI and ECB meeting minutes due on Thursday. These could serve as significant catalysts for the currency pair.
Technical Analysis: A Tricky Path Ahead for EUR/JPY
The pair remains wedged within the 157.00/158.50 zone, exhibiting a bullish bias. Friday’s trading was capped by the Tenkan-Sen line at 158.18. If the cross fails to sustain its momentum above 157.00, it could set the stage for a new trading range between the August 3 low of 155.53 and the August 23 low of 156.87.
For the bulls, overcoming the Tenkan-Sen line could pave the way towards the year-to-date high of 159.49. Conversely, a significant breakdown below 158.00 could prompt a slide to the 157.00 level and possibly extend to the August 23 low of 156.86.
TRADE IDEA DETAILS
CURRENCY PAIR: EUR/JPY
CURRENT TREND: Bullish above 158.30
TRADE SIGNAL: Conditional Buy
👉 ENTRY PRICE: 158.40
✅ TAKE PROFIT: 159.40
❌ STOP LOSS: 157.80
The EUR/JPY is trending upwards, buoyed by ECB’s hawkish comments. Technically, the pair is experiencing resistance at the Tenkan-Sen line of 158.18. A breach above this line could signal strong bullish momentum. The risk-to-reward ratio is favorable with 1:2 (60 pip loss vs. 100 pip gain).
- Monitor the pair closely, especially around the 158.18-158.40 area.
- Confirm breakout with a candle closing above 158.40 on the 1H or 4H chart.
- Set a Take Profit at 159.40, near the year-to-date high, offering a potential 100 pip gain.
- Implement a Stop Loss at 157.80, slightly below the recent low and the critical 158.00 level.
- Keep an eye on upcoming CPI data for any abrupt changes to trading conditions.
The trade idea aims to capitalize on the pair’s current bullish momentum and potential for higher moves. However, traders must exercise caution and keep an eye on fundamental economic releases that could influence market sentiment.