EUR/JPY forecast: ECB cuts by 25 basis points
The market was already pricing a 25bp ECB rate cut at today’s ECB meeting with nearly 100% probability. Lo and behold, the central bank delivered just that. There were no surprises therefore when the rate decision was announced, and the euro hardly reacted. The ECB was never going to disappoint those expectations given the weakening inflation pressures and soft growth cars we have seen from the eurozone. Attention was always going to be on the ECB president Christine Lagarde about the future path of monetary policy. She will begin her press conference shortly. The EUR/USD held near 1.0850, near its lowest level since early August. The other euro crosses were mixed. However, the EUR/JPY forecast hadn’t quite turned bearish yet as it held above a key support and traders watched whether the USD/JPY pair would hold its latest attempt to break the 150.00 in response to a series of US data beats.
Euro likely to remain under pressure
The market’s pricing of ECB cuts points to several more 25bp rate cuts in the upcoming meetings, including in the December. A total of 122 basis point cuts is expected until June next year. Perhaps the market is getting a little ahead of itself. But the pressure is unlikely to be alleviated on the euro any time soon, as we don’t have solid data to justify the ECB diverging from the expected easing path. The US election poses additional risk for the euro, especially if Trump, who has promised more tariffs on the eurozone, wins.
Technical EUR/JPY forecast and trade ideas
Source: TradingView.com
The EUR/JPY has been stuck inside a consolidation zone in the past few days, unable to extend its recent recovery. It has been a similar story for the other JPY crosses too, possibly suggesting that the yen selling is done. Still, we need confirmation that the rally is over and that a new downtrend is upon us. Key support sits in around 162.00 which needs to break decisively before we turn bearish on this pair. If that happens then 160.00 could be the next downside target. The most recent low comes in at 158.10. This level will be pivotal in shaping the longer-term technical picture on this pair. If at some point price breaks below that level, then we could see the onset of a major downward move.
But we will cross that bridge if and when we get there. For now, the technical bias is neutral and the EUR/JPY forecast can easily turn bullish in the event the yen selling resumes.
While the 163.50 level has offered stiff resistance in the last several days, it is the area between 164.00 to 165.10 that look more interesting from a technical standpoint. In this range, you have prior support, the high from last year and the 200-day moving average all converge. So, until this area is now cleared, I would feel somewhat uncomfortable looking for bullish setups on the EUR/JPY.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Contracts for Difference (CFDs) are not available to US residents.
FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.
Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.
© FOREX.COM 2024