The EUR/JPY gains halted around 134.88, the highest level for the pair since 2015. The pair made a correction to the 133.90 level at the start of Tuesday’s trading, and was bullish at the time of writing and then settled around 134.50, awaiting a stronger catalyst for more risk appetitive. The pair ignored the political worries with the victory of pro-independence parties in the recent Catalonian elections. The EUR/JPY is still the pest performing pair of the JPY, with increased risk appetite, especially with the passage of the US tax cut law. We have consistently mentioned in previous analysis that buying the pair from each downward bounce is the best strategy for this pair. It is clear on the daily chart that the peak of 134.45 is still strong, which the pair tried to break through a number of times, and that the current bounce might stop there and the pair would retreat if it didn’t find stronger support to break through stronger peaks. The Eurozone inflation data didn’t provide any support to the Euro. The pair is waiting for risk appetite to have an upward chance. The ECB didn’t provide any update regarding their monetary policy, maintaining the interest rate as is, the Draghi’s comments were normal, and the Euro didn’t have any reactions with the US dollar or any other major currency.
And despite the inflation increase in the Eurozone, ECB governor, Mario Draghi, wants to see stable inflation around the bank’s 2% target, and not a raise due to temporary reasons. The markets ignored the latest North Korean missiles tests, and the risk appetite increased, as these tests apparently will continue to be a routine matter for the markets, and as long as there is no unusual military movement, the markets will digest these tests quickly.
Technically: The EUR/JPY is currently in a strong bullish move, and the nearest resistance levels are currently at 135.45 and 136.60, with the nearest support levels are at 134.20, 133.50 and 132.70. We still prefer buying the pair at each downward bounce. In light of market closer due to holidays this week and early next week for Christmas and New Year, traders need to be alert of price gaps due to markets coming back in interrupted form sometimes, and it is better to avoid trading until the markets are fully back to normal.
On the economic data front: Today’s economic agenda will focus on announcing inflation and unemployment data in Japan, as well as comments from the governor of Bank of Japan, Koruda. There are no important data from the Eurozone today. The pair will be on the watch for any developments regarding the move towards safe heavens led by the JPY in case of more geopolitical worries regarding the conflict between North Korea and the US, or the political worries in the Trump administration.
