In the aftermath of the holiday season, the Euro is steadily climbing higher against the weak Japanese Yen. This upward movement can be attributed to the positive market sentiment prevailing after Christmas. While other currencies might be struggling to maintain their momentum, the Euro seems to be benefiting from the current risk-on mood, making it an attractive option for investors.
The Euro’s rise is further fueled by the dovish stance of the Bank of Japan (BoJ). The central bank’s cautious approach and lack of a significant policy shift at their December meeting have disappointed market expectations. The recently released BoJ Summary of options confirmed the divergence in opinions among policymakers. Some committee members believe it is time to end the ultra-loose policy, while others are more wary due to perceived small risks to inflation.
Earlier this week, Governor Ueda’s statements did little to shed light on the bank’s future policy outlook. Ueda emphasized that any potential changes would be dependent on the progress towards achieving the inflation target, which has consistently fallen short of expectations. This lack of clarity from the BoJ has added to the overall dissatisfaction among investors, creating a more favorable environment for the Euro.
As a result of these factors, EUR/JPY is currently testing the 157.75 resistance level. This level is significant as it marks the next hurdle for the pair, with the December 19 high and the 50% Fibonacci retracement level of the late-November sell-off converging at 158.55. If the Euro manages to break through these levels, it could indicate a further strengthening against the Japanese Yen.
The current market conditions suggest that the Euro’s upward movement against the Yen is likely to continue. With the positive market sentiment and the dovish stance of the BoJ, investors are finding more reasons to favor the Euro over the Yen. However, it is important to keep an eye on any potential developments or policy shifts from the BoJ that could change the dynamics of this currency pair.
The Euro’s rise against the Japanese Yen is not only driven by the positive market sentiment but also by the cautious approach of the BoJ. As the Euro continues to test crucial resistance levels, it becomes crucial for investors to closely monitor any changes in policy direction from the central bank.
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