Facts:

• The EURJPY pair has declined to its lowest level since mid-September, reaching a demand zone associated with local lows from the past 1.5 years.
• The decline in EURJPY was more pronounced than that of USDJPY, reflecting euro weakness and uncertainty about the future of the European economy.
• The Bank of Japan’s decision is scheduled for December 19th, while the ECB’s decision is earlier, on December 12th.

Trade: Long position at the market price.

• TP1: 162.5
• TP2: 164.5
• SL: 155.0

Rationale:

The EURJPY pair has declined significantly more than USDJPY. Central bank decisions are approaching. The ECB will announce its decision on December 12th, while the Bank of Japan on December 19th. The market still sees a significant chance of a larger rate cut from the ECB, but the lack of further declines in PMI indices and the rebound in inflation are unlikely to lead to a larger cut, which should be supportive for the euro. On the other hand, in the case of the Bank of Japan, there have been no recent signals regarding a possible rate hike. Nevertheless, the market assigns over a 50% probability to a rate hike by the BoJ. If the bank does not raise rates, there may be significant disappointment in the yen. The EURJPY pair has declined more sharply but is rebounding near a crucial demand zone defined by lows since August 2023.