JPY cross pairs analysis
Market volatility and central bank actions shape major currency pair performance
EUR/JPY experiences flat movement amid bank holidays, potential correction towards trendline support anticipated
USD/JPY poised to continue upward movement
GBP/JPY pulls back from seven-year high due to mixed sentiment and doubts about central bank actions, buyers remain hopeful
The USD/JPY is currently positioned slightly above the significant psychological level of 140.00. It appears to be in a favorable position to continue its upward movement, which has been observed over the past couple of weeks.
On the upside, the daily chart paints a positive picture as the pair rises above 2 simple moving averages . The pair has successfully surpassed a strong resistance near 138 and is now continuing to gather upbeat momentum above 140.
On the downside, the pair retreated earlier today from its 6 months high below 141, with RSI quoting oversold levels.
There is currently a greater than 50% probability, as indicated by market pricing, of a 25 basis points interest rate increase at the upcoming June FOMC meeting. This belief is reinforced by a recent upward movement in US Treasury bond yields, which has led to a wider interest rate differential between the US and Japan. Consequently, this has resulted in a shift of capital away from the Japanese Yen (JPY).
Bullish momentum in GBP/JPY has paused as the UK markets were closed for Memorial Day on Monday, leading to a sluggish start to the week. This breather has prompted cross-currency buyers to trim recent gains around the 173.50 level, following the currency pair's ascent to a seven-year high.
The pullback from the highest levels seen since February 2016 can be attributed to a mixed sentiment prevailing in the market, along with concerns about a potentially hawkish stance by the Bank of Japan (BoJ). Additionally, doubts about the Bank of England's (BoE) ability to maintain its rate hike bias are also exerting downward pressure on GBP/JPY.
Despite the overbought condition indicated by the Relative Strength Index (RSI), buyers of GBP/JPY remain optimistic as long as the price stays above a significant resistance line from seven months ago, located around 172.50 at the current time. This suggests that buyers are still confident in the upward trajectory of GBP/JPY unless there is a sustained drop below the mentioned resistance line.
The current trading price of EUR/JPY is 150.10, with the currency pair having fluctuated between a low of 149.37 and a high of 150.15 during the day. Whilst the daily chart today shows flat movement with regard to the bank holidays.
However, there are indications of a potential correction in the near term towards the trendline support before any further upward movement resumes.
On the hourly chart, the price is falling below 150 which holds a firm support level, if the price carries on the downward trajectory. Prices could extend to a break below the 149 level to 148.70 which is the next support level.