2) EURJPY

Technical Analysis (MA, RSI, STOCH, MACD, ADX)

• M30 - DOWN
• H1 - UP
• H4 - UP
• D1 - RANGE
• W1 - UP
• MN - UP

• Resistance: 131.50, 132.50, 133.60
• Support: 130.00, 129.60, 128.00

Yesterday the currency pair was trading in extremely different directions, without a clear direction, there were many reasons for such a movement. Here are the stock markets of Europe and Japan, which remain under pressure. Also with this is the fear that returns to the market again, as well as the expectations of important macro data. The Fear-Greed indicator is still in the neutral zone and points at 50.

Fear has been brought back to the market by a series of COVID news. WHO Director-General Tedros Adanom Ghebreyesus said yesterday that the Omicron strain appears to be less dangerous than the Delta strain, but it cannot be characterized as mild. Also, the Chinese metropolis of Shenzhen remains closed due to the outbreak of COVID and a zero morbidity policy.
The Japanese government is seeking approval of a limited-state of emergency in the prefectures of Okinawa, Hiroshima and Yamaguchi due to the spread of COVID.

In terms of data, Germany posted November production orders that rose 3.7% mom, beating expectations. The EU PPI rose by as much as 23.7% y / y in November, while inflation in Germany rose 5.3% y / y in December. Such a high level of inflation in Germany was last recorded in 1992. Now all attention will be clearly focused on the publication of inflation in the Eurozone.
If the data show stronger-than-expected inflation, then the EUR could gain enough strength against its peers due to the possibility of faster action by the ECB to provide monetary support in the face of persistent inflationary pressures.

In Japan, according to media reports, policymakers from the Bank of Japan remain unconcerned by the recent plunge in the yen, but the BoJ is more concerned about the government's reaction if the USD / JPY exchange rate hits 120.00.

The currency pair traded quite actively yesterday, the main direction was upward, but after testing the resistance level of 131.50, the currency pair began to fall down. The main drivers are considered to be serious volatility in the stock markets of Japan and the EU. The Nikkei 225 stock index fell 2.7%, the EUR50 index fell 1.5%. Against this background, the value of the Fear-Greed indicator at the moment fell back into the neutral zone, now it points to 51.

It is unlikely that yesterday's rally is the beginning of a new trend, or a change in the current one, it is most likely temporary volatility that strengthened both currencies at the moment, now we will most likely observe a slight correction.

BoJ officials said the government's request to the Bank of Japan to take measures to contain the depreciation of the national currency could be a problematic factor for monetary policy, since the BoJ does not have effective tools to manage the currency. But BOJ officials also see that the yen's decline, if slow, would be acceptable, as Japan is far from its target of sustained inflation of 2%. If inflation in Japan were above 2%, officials would consider the yen's weakness undesirable. In other words, the Yen can fall as much as necessary, if not quickly.
From the data, Japan today posted a very negative annual household expenditure index, which was significantly worse than forecasted at -1.3%.

Next, we monitor the demand for protection, as well as the publication of the inflation rate in the Eurozone.

The fundamental picture continues to be more bullish, the downward movement was solely responsible for the demand for protection, which, as we see since the beginning of the year, has practically disappeared. The main drivers of the currency pair's growth are the position of BoJ in relation to the national currency and the definitely softer monetary policy of BoJ.

#fx #trading #forex #analyze #MT4 #MT5 #EURJPY