Source: Justin Low, ForexLive (via TradingView)
Title: EUR/JPY Strengthens Against the USD While AUD and NZD Underperform
In forex markets, investor sentiment and shifting economic dynamics are driving significant moves across major currency pairs. Among the key developments so far, the euro has shown strength specifically in its performance against the Japanese yen (EUR/JPY), even while the US dollar (USD) holds relatively firm. Meanwhile, the Australian dollar (AUD) and New Zealand dollar (NZD) are facing headwinds and lagging broader market trends.
Below is a detailed breakdown of the latest movements and underlying drivers shaping these currency pairs, as reported by Justin Low at ForexLive.
EUR/JPY Continues its Bullish Momentum
– The EUR/JPY pair is exhibiting renewed strength, climbing to 11-day highs during morning European trading hours.
– The rally is taking place despite broader USD resilience in the market, signaling that the euro’s performance isn’t simply a counter-move to USD softness, but rather a relative strength versus the Japanese yen.
– A key area of resistance in the daily chart had previously capped EUR/JPY rallies, but the pair has now managed to breach those levels, suggesting further upside momentum.
– Traders are watching for a potential retest of April and May highs, situated near the 170.00 level. While that remains some distance away, the bullish sentiment is growing.
– The yen, conversely, remains under pressure across the board, largely due to diverging monetary policy trajectories.
Yen Weakness Driven by Policy Divergence
– The Japanese yen remains soft, with the Bank of Japan (BOJ) still maintaining ultra-loose monetary policy while other central banks, including the European Central Bank (ECB), have moved toward normalization or at least signaled hawkish shifts.
– Yield differentials between Japanese government bonds and their European or American counterparts continue to support selling pressure on the yen.
– Traders are also looking to the BOJ’s next policy meeting for potential clues about future moves. However, expectations for an imminent shift remain low.
– Furthermore, Japanese officials have offered verbal warnings about excessive yen moves but have not backed those words with intervention, reducing the immediate support level for the currency.
USD Maintains Broad Strength, Exerting Pressure
– The US dollar index (DXY) remains firm after a series of upbeat economic indicators from the United States have kept expectations of persistent inflation and continued Federal Reserve caution alive.
– Recent data points, including strong job market figures and sticky inflation readings, have led markets to push back expectations of rate cuts by the Fed.
– The greenback’s resilience is particularly evident against commodity-linked currencies and those in regions where central banks are nearing or engaged in easing cycles.
AUD and NZD Struggle for Traction
– Among the worst-performing major currencies are the Australian dollar and New Zealand dollar.
– Both currencies are heavily influenced by global risk sentiment and Chinese economic performance. The current climate of modest risk aversion and concerns about slower-than-expected Chinese stimulus are dampening demand.
– Furthermore, domestic economic data has been on the softer side. In Australia and New Zealand, economic growth is showing signs of slowing, which is fueling speculation that their respective central banks may consider rate cuts ahead of the Fed.
– The Reserve Bank of Australia (RBA) has remained relatively neutral, but the market is beginning to price in softening bias given weak consumer and business sentiment surveys.
– For the Reserve Bank of New Zealand (RBNZ), market participants are similarly expecting some potential loosening, particularly if global growth continues to decline through late 2024.
Key Technical Levels Across Major Pairs
EUR/JPY:
– Recent highs at 170.00 remain the next key resistance if the pair continues its upward trend.
– Support levels appear near the 163.00 range, where previous consolidations took place.
USD/JPY:
– The pair remains elevated near multi-decade highs, reflecting persistent dollar
Explore this further here: USD/JPY trading.