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1 Nov 2023

EUR/JPY receding back into 159.00 after rally into record bids

  • The EUR/JPY is seeing a relief pullback, dipping back towards 159.00.
  • The Euro hit its highest bids against the Yen since 2008, peaking at 160.85.
  • Dovish BoJ sapping Yen strength, EU data missing the mark.

The EUR/JPY tipped into a fifteen-year high of 160.85 on October 31st with the Yen (JPY) continuing to collapse across the broader market as the Bank of Japan (BoJ) continues to waffle on lifting interest rates.

With the BoJ interest rate differential with all other major central banks continuing to widen, there's little else for the Yen to do but continue to weaken.

European economic data continues to miss the mark, softening up the Euro (EUR) after EU Gross Domestic Product (GDP) figures came in below expectations early Wednesday. EU GDP for the 3rd quarter came in at -0.1%, declining from the previous quarter's 0.1% and missing the forecast of a flat 0%.

Pan-EU Harmonized Index of Consumer Prices (HICP) for the year into October also missed market expectations, printing at 2.9% versus the forecast 3.1%, and declining even further than expected from the previous 4.3%.

The BoJ broadly flubbed market expectations of defensive posturing to protect the Yen, holding steady on policy rates, mechanisms, and only introducing a minor change in their yield control curve policy tool as the Japanese central bank continues to fear long-term inflation failing to meet the BoJ's minimum target of 2%.

The BoJ's own inflation expectations don't see inflation declining below 2% until well into 2025, even as Japanese consumers continue to suffer under the weight of a collapsing Yen.

EUR/JPY Technical Levels

The EUR/JPY is falling back towards the 159.00 handle as the pair drifts back towards the near-term median at the 200-hour Simple Moving Average (SMA) just below 159.00, paring back yesterday's gains.

The pair is threatening to tip back into familiar swing highs near 158.80, and the last meaningful swing low rests at October 30th's low of 157.70.

Today's pullback sees the EUR/JPY consolidating between the 200-hour SMA and the 50-hour SMA near 159.60.

EUR/JPY Hourly Chart

EUR/JPY Technical Levels

 

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