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The EURJPY has been trading under the 142.70 resistance area since the end of December 2022. With the price failing to break through over several occasions, the recent weakness in the Japanese Yen has seen the EURJPY trade beyond the resistance level, signaling the potential for a significant move to the upside.
The recent weakness in the Japanese Yen comes not only because of the strength of the DXY but from the announcement of Kazuo Ueda as the next Bank of Japan (BoJ) Governor. Kazuo Ueda stated that the BoJ’s current monetary policy is appropriate and that should continue.
A sustained move to the upside would not only be dependent on the weakness of the Japanese Yen. A recovery in the strength of the Euro could provide the additional push, to drive the EURJPY higher. ECB President Lagarde has continued to maintain her hawkish view by commenting that she intends to raise rates by 50bps at the next ECB meeting in March.
Looking at the technical analysis, the EURJPY is likely to retrace briefly down to the 23.6% Fibonacci retracement level, which coincides with the resistance turned support level, before trading higher toward the key resistance at 145.60, formed by the previous swing high level. However, if the EURJPY trades significantly lower, past the previous swing low and the 50% Fibonacci retracement level, this breakout potential could be invalidated.
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