2) EURJPY

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

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

• Resistance: 129.50, 130.00, 131.50
• Support: 127.50, 127.30, 126.10

The currency pair completed its third consecutive week of mixed trading at 128.00. This week was eventful, and the classic Santa rallies in the world stock markets and, of course, the demand for protection played an important role in the high volatility. The currency pair traded in a wide range of 200 pips, at the close of -45 pips. Growing concerns about the growing number of Omicron infections, and the approaching worsening liquidity conditions during the Christmas and New Years, have pushed the Fear-Greed indicator down to 26.

As we get closer to 2022, we believe COVID developments will continue to have an important impact on the global economic recovery, as well as on the foreign exchange markets. Strain-Omicron has not yet demonstrated its full economic impact, which creates new risks of deterioration in global economic activity. Research on Omicron is still pending, however, if Omicron becomes the new new Delta, a rapid global economic recovery could be a big question mark next year. Persistent inflationary pressures should also continue to have a significant impact in 2022, creating some downside risks to growth as it affects consumer purchasing power and prompts central banks to tighten monetary policy.

China's economy has been under pressure for most of 2021 amid the government's commitment to a zero-morbidity policy related to COVID, as well as protecting the economy from perceived systemic risks. All this only pushed the already shaky real estate market into a crisis. As of now, 12 major Chinese developers have defaulted. The largest was China Evergrande, which defaulted on its bonds on December 9. In any case, the Chinese government will not be able to stay on the sidelines for long, so we are watching the development of this story.

Of the events this week, by far the most important were the meetings of the central banks.
The European Central Bank has confirmed that it will end its emergency PEPP bond purchase program in March, but also announced plans to continue its regular APP asset buying program on an expanded scale. APP will be increased to 40 billion euros in the second quarter and 30 billion euros in the third quarter, and then to 20 billion euros indefinitely. The ECB's inflation forecast for 2022 has been significantly raised (to 3.2% from 1.7%), but ECB President Christine Lagarde has been keen to emphasize that an increase in 2022 is unlikely.
Later on Friday, the latest data on inflation in the eurozone was released, which was fully in line with forecasts and previous values. The core consumer price index (CPI) in November was 2.6% on an annualized basis. The general consumer price index (CPI) in November was 4.9% year on year. The market in this publication saw an opportunity for the ECB to continue to pursue its soft monetary policy for longer, putting pressure on the EUR.

As for the Bank of Japan, the BoJ left the policy unchanged and will decide whether to cut the stimulus measures under the QQE program only after March. It also allowed part of its emergency financing program for small and medium-sized businesses to be extended for an additional six months after the March 2022 deadline. The yield curve control policy remained unchanged by 8-1 votes, confirming its softest position among major central banks. The short-term target interest rate remains at -0.1%, ending the sixth year of negative rates, and the yield on 10-year bonds is around 0%. Japanese macro data has been very weak this week. Industrial production in October fell by 4.1% against 4.7%. Expansion in November exports was slightly below expectations, while imports were higher. Japan's November trade surplus, which posted a deficit of -954.8B billion yen, is the worst since February 2020.

Next week, we are following the development of events around Omicron and the Chinese real estate market, as well as:
Wednesday:
- BoJ Monetary Policy Statement - JPY
**Friday:**
- Japan National Core CPI (YoY) (Nov) - JPY

In other words, the prospects for the currency pair are very clear. In the medium term, the currency pair should return to the upward movement, immediately after the market phase will facilitate this. The rise in the number of Covid cases around the world, mainly by the new Omicron strain, and restrictions in Europe, Japan and elsewhere have returned risk aversion by boosting demand for the Japanese Yen. In other words, an upward move will recover after investors no longer need protection.

The fundamental picture, which is still more bullish than bearish, is solely responsible for the downward movement by the demand for protection. So it is possible that the currency pair will continue to experience pressure in the near future, but the mid-term estimate of the movement is upward, here is the position of the BoJ in relation to the national currency, plus the rather weak macro data from Japan and the definitely softer monetary policy of the BoJ.


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