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

USD/JPY and EUR/JPY Prices, Charts, and Analysis:

• USD/JPY The price testing the 50-day and 100-day moving averages remains bullish above the 130.00 sentiment level.
• euro/yen Note the breakout of the triangle pattern that could drive a significant upward move.
• both EUR/JPY and USD/JPY Faced with technical hurdles, but in the face of price action, the fundamentals support a further upside narrative in the case of EUR/JPY.
• For more information price action, chart pattern and moving average,check out DailyFX Education Section.

Japanese Yen Fundamentals

The Japanese Yen posted a somewhat timid move at the end of March, giving up some of the gains recorded at the beginning of the month. On March 9, fears over a potential fallout saw Yen gains as the SVB Bank story came to the fore and investors fled to take their assets to safety.

After that, overall sentiment improved, with the euro particularly sharply depreciating in the last week of March, with some impressive gains. EURJPY is currently trading around the 145.00 level, the SVB’s pre-fallout level, as the yen remains weak this morning. Looking at the currency strength chart below the Yen, it is the second weakest currency as the European session is in full swing.

Currency Strength Chart: Strongest – New Zealand dollarthe weakest – Australian dollar

Source: Financial Juice

The Bank of Japan is set to welcome its new governor on April 9 with Kazuo Ueda. The incoming governor faces many challenges and questions surrounding the central bank’s accommodative monetary policy stance. Ueda himself reiterated the need for policy continuation, but the recent release of a summary of opinions from the March meeting indicated that some members acknowledged the need for future policy reviews. Given that year-on-year inflation fell sharply in February despite higher core CPI (excluding food and energy), we don’t see any policy change by the incoming governor anytime soon, and the BOJ is likely to will provide an update before the high move is realized.

Technical Outlook for USD/JPY and EUR/JPY

From a technical standpoint, USD/JPY continues to move higher from its March 24th low, briefly dipping below the psychological 130.00 mark. However, the pair failed to register a daily candlestick below this level before converging toward resistance near his 133.00 handle, which lines up with the 50-day moving average.

The USDJPY rally is particularly surprising given that the dollar continues to struggle in the second half to underscore the pressure facing the yen early in the second quarter. A continuation of USDJPY’s short-term rally cannot be ruled out, but it is currently trading in an area that presents a number of technical challenges for the pair to overcome. 133.00 resistance area after USDJPY opened up with a small gap yesterday and he sees the 100 day moving average closing below the 50 day moving average he is resting just shy of the 134.00 handle I refused. With little resistance path to the 135.70-136.00 area, a break above the 100-day moving average could lead to a 200 pips gain.

USD/JPY Daily Chart – April 4, 2023

Source: TradingView, chart created by Zain Vawda

Meanwhile EURJPY is up around 600 pips since the SVB inspired drop found support around the 139.00 level. There was also a double bottom print here suggesting a potential upside move that also gained traction in the last week of March.

Currently, a symmetrical triangle pattern is at work, with EURJPY likely to break higher as Eurozone fundamentals continue to show improvement. The ECB policymaker’s hawkish rhetoric continues, with the ECB’s Holzmann reiterating yesterday that his 50bps rate hike in May remains in the cards supporting the upside narrative.

A break in the triangle pattern would provide immediate resistance at the 146.47 level (high swing on Dec 22nd) and a higher break could lead to resistance at the 148.40 handle. If we see a pullback towards the moving averages here, this definitely offers potential longs with a better risk-to-reward ratio. The 100-day MA has just broken out of the 200-day MA in a golden cross pattern, which could provide significant support near 142.70-143.00.

euro/yen Daily chart – April 4, 2023

Source: TradingView, chart created by Zain Vawda

Written by: Zain Vawda, Market Writer DailyFX.com

Contact and follow Zain on Twitter. @zvawda