EUR/JPY trades at cycle highs after BOJ decision

• The EUR/JPY closes a winning week of 300 points, trading in the 155.l20 area.
• As expected, the two-day BOJ meeting concluded without any monetary policy adjustment.
• The divergence of monetary policy now favors the Euro.

At the end of the week, the EUR/JPY pair gained more than 1% and reached a new cycle high of 155.20. In this sense, the ultra-moderate stance of the Bank of Japan (BoJ) in light of the aggressive messages from the European Central Bank (ECB) on Thursday, where Christine Lagarde hinted at more hikes, seems to be giving traction to the Euro.

The BOJ kept its monetary policy unchanged, as expected

The Bank of Japan (BOJ) recently concluded its two-day meeting without making changes to its monetary policy, as anticipated by the markets. The bank acknowledged that inflation expectations have been relatively stable, but that core inflation is slowing due to government measures to reduce energy prices. The bank expects inflation to continue decelerating by the middle of the 2023 fiscal year and stressed the need to monitor developments in the financial and currency markets.

At the press conference, Governor Ueda mentioned that different data between policy meetings could lead to mixed results, but any significant change in the inflation outlook could trigger policy tightening.

Looking ahead, according to World Interest Rate Possibilities (WIRP), markets see a 15% chance of a policy change in July, when an updated macro forecast is released, rising to 25% in September, to 45%. in October and 65% in December.

technical levels

According to the daily chart, the EUR/JPY pair is bullish in the short term as the RSI and MACD suggest that buyers are in control while the pair is holding for above its main moving averages. However, both indicators suggest intense overbought conditions as the pair has gained over 2% in the past two days and over 3% on the week, suggesting that a healthy correction may be needed to consolidate gains.

Next resistance for EUR/JPY is seen at the next round level of 155.30, followed by the 155.55 zone and the 156.00 area. On the other hand, the psychological level at 154.00 is the immediate support level for the cross that could act as support in case of a correction, followed by 153.35. A break below this level could pave the way towards the 153.00 area and then the 152.00 area.

EUR/JPY Daily Chart