USD/JPY, EUR/JPY Approaching Key Resistance Areas, Breakouts Incoming?

USD/JPY AND EUR/JPY PRICES, CHARTS AND ANALYSIS:

• USD/JPY Price Testing the 50 and 100-Day MAs, Remains Bullish Above the 130.00 Psychological Level.
• EUR/JPY Eyeing a Breakout of the Triangle Pattern which Could Facilitate a Significant Rally to the Upside.
• Both EUR/JPY and USD/JPY Face Technical Hurdles but Price Action and in the Case of EUR/JPY the Fundamentals Support the Narrative for Further Upside as Well.
• To Learn More About Price Action, Chart Patterns and Moving Averages, Check out the DailyFX Education Section.

JAPANESE YEN FUNDAMENTALS

The Japanese Yen recorded a rather timid end to the month of March surrendering some of its gains recorded in the early part of the month. The 9th of March brought the SVB Bank saga to the fore and fears around a potential fallout saw the Yen benefit as investors fled toward safe have assets.

Overall sentiment has since improved, the last week of March saw the Yen take abit of a beating with the Euro in particular putting in some impressive gains. EURJPY is currently trading back at the level it was prior to the SVB fallout, around the 145.00 level as the Yen remains weak this morning. Taking a look at the currency strength chart below the Yen is the second weakest currency as the European session kicked into gear.

Currency Strength Chart: Strongest – NZD, Weakest – AUD

Source: FinancialJuice

The BoJ is about to welcome its new Governor with Kazuo Ueda on April 9. The incoming Governor faces a host of challenges and questions around the Central Banks easy monetary policy stance. Ueda himself has reiterated the need for a continuation of the policy while the recent release of the summary of opinion from the March meeting did see some members acknowledge the need for a policy review moving forward. Given that the YoY inflation print did fall a significant amount in February despite a rise in the core CPI (excluding food and energy) which ticked higher, I do not see any change in policy from the incoming Governor in the immediate future with the BoJ likely to provide updates before a move materializes.

TECHNICAL OUTLOOKS FOR USD/JPY AND EUR/JPY

From a technical perspective, USD/JPY has continued its rise from the March 24 low which tested and traded briefly below the psychological 130.00 mark. The pair however failed to record a daily candle close below this level before rallying toward resistance around the 133.00 handle which lines with the 50-day MA.

The rally in USDJPY is particularly surprising given the US dollars continued struggles of late emphasising the pressure facing the Yen at the beginning of Q2. Short-term upside continuation cannot be ruled out for USDJPY however we are currently trading in an area that presents a host of technical challenges for the pair to overcome. Yesterday saw USDJPY open with a slight gap to the upside before declining to close back below th 133.00 resistance area and the 50-day MA with the 100-day MA resting just shy of the 134.00 handle. A break above the 100-day MA could result in a 200-pip rally to the upside as we have little n the way of resistance all the way upto the 135.70-136.00 area.

USD/JPY Daily Chart – April 4, 2023

Source: TradingView, Chart Prepared by Zain Vawda

EURJPY meanwhile has rallied some 600 pips since the SVB inspired drop found support around the 139.00 level. We also had a double bottom print here hinting at a potential upside move which gained traction in the last week of March as well.

We have a symmetrical triangle pattern in play currently with EURJPY looking likely to break higher as fundamentals from the Euro Area continue to show improvement. ECB policymakers’ hawkish rhetoric has continued with the ECB’s Holzmann just yesterday reiterating that a 50bps hike for May remains on the cards supporting an upside narrative.

A break of the triangle pattern will bring immediate resistance at the 146.47 level (December 22 swing high) into play with a break higher potentially leading to resistance at the 148.40 handle. If we are to see some pullback here toward the moving averages this will undoubtedly provide potential longs with a better risk to reward ratio. The 100-day MA having just crossed above the 200-day MA in a golden cross pattern as well and is likely to provide significant support to the around the 142.70-143.00 area.

EUR/JPY Daily Chart – April 4, 2023

Source: TradingView, Chart Prepared by Zain Vawda

Written by: Zain Vawda, Markets Writer for DailyFX.com

Contact and follow Zain on Twitter: @zvawda