EUR/JPY Price Analysis: Yen starts to gain traction as BoJ gives more clues of a potential pivot

• EUR/JPY fell to a low near 156.60, it lowest since early August.
• Governor Ueda pointed out that a pivot may come by year’s end.
• Markets are still deciding whether the ECB will hike on Thursday or not.

On Monday, the EUR/JPY  traded in the 156.60 - 157.55 range. On the one hand, the Japanese Yen is trading with gains against most of its rivals, including the USD, GBP, AUD, etc., mainly driven by a rise in Japanese Government Bond yields after Bank of Japan (BoJ) comments on monetary policy. On the other hand, the Euro is trading soft as investors gear up for the European Central Bank (ECB) decision on Thursday.

The Japanese Yen is one of the top performers in the session, mainly driven by Governor Ueda’s comments during the Asian session. He pointed out that the Bank of Japan (BoJ) may gather enough evidence by the year's end to know whether the economy is ready to pivot to a contractive monetary policy. That being said, he still believes wages and inflations are not meeting the bank’s forecasts. However, if they sustainably grow for the rest of this year, the bank would consider leaving behind the negative interest rates policy.

The 2- and 5-year JGB yields rose to their highest level since January, while the 10-year JGB rate broke above the 0.70% level.

On the EUR side, markets await the ECB’s decisions on Thursday. The expectations are mixed as the World Interest Rates Probabilities (WIRP) tool suggests that markets discount nearly 40% odds of a 25 basis point hike and analysts predict that the decision will be a close call. In addition, Lagarde’s tone and the ECB’s statement will be closely watched for investors to look for clues regarding forward guidance.

EUR/JPY Levels to watch 

The technical analysis of the daily chart points to a neutral to bearish outlook for EUR/JPY, indicating the potential for further bearish movement. The Relative Strength Index (RSI) signals a bearish sentiment with a negative slope below its midline, while the Moving Average Convergence (MACD) histogram presents larger red bars. Furthermore, the pair is below the 20-day Simple Moving Average (SMA) but above the 100 and 200-day SMAs, indicating that the buyers still hold momentum on the bigger picture, dominating the sellers.

 Support levels: 156.60, 156.00, 155.00.

 Resistance levels: 157.00, 158.25 (20-day SMA), 159.00.

EUR/JPY Daily Chart