Facts:
- The price rebounded from the 30-period Exponential Moving Average (EMA) and turned around twice before testing the 100-period EMA.
- Money markets are pricing in three interest rate cuts in the Eurozone and one rate hike in Japan by the end of 2025.
Recommendation:
- Trade: Short position (sell) on EURJPY at the market price.
- Target Price (Take Profit): 156.000 (TP1), 154.500 (TP2).
- Stop Loss (SL): 162.800.
Source: xStation5
Opinion:
The relatively flat trend in EURJPY was broken at the beginning of February. The price then declined and remained below the 30-period EMA, following the broader trend of euro weakness in response to the announcement by the U.S. president regarding potential tariffs on goods from the European Union (Donald Trump did not specify the scale or timing of these tariffs at the time). On February 9, the exchange rate rebounded from the 156.000 support level, which had been tested multiple times throughout 2024, after Donald Trump, in a conversation with the Japanese president, first addressed the possibility of tariffs on Japan. Despite the yen’s temporary weakness, the exchange rate has just bounced off the 30-period EMA after previously reversing near the longer-term 100-period EMA.
Considering the weakening expectations regarding the actual impact of the U.S. president’s trade policy and the opposing directions of monetary policy in the Eurozone and Japan—where the Eurozone is expected to continue cutting interest rates due to concerns over economic growth, while Japan is expected to keep raising rates due to inflationary pressures, especially from wages—the EURJPY currency pair has the potential to deepen its downward trend.
Methodology:
The recommendation is based on technical analysis of the EURJPY chart and fundamental analysis of policy, including central bank monetary policies, in the respective economies. The price action methodology was used to determine Take Profit levels. The trade direction and Stop Loss also incorporate Exponential Moving Averages (EMAs). The Stop Loss is set above the longer-term 100-period EMA to confirm a change in the current trend before closing a losing position.
