EUR/JPY showed notable market activity during early European trading on Friday, rebounding to near 174.00 after retreating from a 14-month high of 174.50 recorded on the previous session.
The currency pair’s behavior is under scrutiny as traders weigh the implications of weaker-than-expected German Producer Price Index (PPI) data for August against the backdrop of an ongoing bullish trend. The article by LFtrade, authored by Mark Fisher, gives readers a clear and structured look at the topic.
Technical Overview
The daily chart analysis for EUR/JPY highlights a continued bullish bias, supported by several key technical indicators. The 14-day Relative Strength Index (RSI) remains above 50, reinforcing upward momentum and signaling that buying pressure still dominates the near-term market sentiment.
In addition, the nine-day Exponential Moving Average (EMA) at 173.55 serves as a critical short-term support level. Holding above this EMA indicates that the bullish momentum remains intact, even as the currency cross retraces from the recent high. The combination of RSI positioning and EMA support suggests that the EUR/JPY pair could continue its upward trajectory, provided no major fundamental shocks occur.
Rebound and Key Resistance Levels
After retracing slightly from the 174.50 peak, EUR/JPY has stabilized around 174.00, a psychological resistance level that could act as a springboard for further gains. A successful rebound above 174.00 may prompt the currency pair to test the previous high and subsequently target the upper boundary of the ascending channel near 174.70.
The ascending channel pattern observed on the daily chart remains a crucial technical formation. As long as the pair trades within this channel, the bullish bias is expected to persist. Traders will closely monitor the channel’s upper boundary, as a breakout above this level could open the door for EUR/JPY to explore the region around the all-time high of 175.43, last recorded in July 2024.
Downside Risk and Support Levels
On the downside, the nine-day EMA at 173.55 is the first line of technical support. A decisive break below this level could signal a dampening of bullish sentiment, opening the door for a pullback towards the ascending channel’s lower boundary near 172.40.
Further weakness could see EUR/JPY testing the 50-day EMA at 171.84, an important medium-term support level that may attract buying interest from technical traders. Maintaining the EMA levels is crucial for sustaining the current bullish trend, and any breach could shift market sentiment toward a neutral or bearish outlook in the short term.
Impact of German PPI Data
The release of German Producer Price Index (PPI) data for August showed weaker-than-expected readings, reflecting slower inflationary pressures in Europe’s largest economy. While this could have negatively impacted the EUR, the EUR/JPY pair has demonstrated resilience, trimming daily losses and maintaining its position above critical support levels.
This behavior indicates that market participants are focusing on technical patterns and momentum indicators rather than solely on fundamental data. The ability of EUR/JPY to remain within the ascending channel despite weaker PPI numbers underscores the strength of the bullish trend and the importance of psychological price levels like 174.00.
Momentum Indicators and Market Sentiment
Short-term momentum indicators remain favorable for EUR/JPY, with the 14-day RSI consistently above 50 and the pair holding above the nine-day EMA. This combination reinforces a bullish market sentiment, suggesting that traders are willing to accumulate positions at support zones in anticipation of further gains.
The currency pair’s trajectory also benefits from technical confluence, where multiple indicators such as the EMA, RSI, and ascending channel boundaries align to support continued upside potential. As long as EUR/JPY stays above these key support levels, the outlook remains positive, and the pair may aim for higher targets in the near term.
Conclusion
In summary, EUR/JPY has retreated slightly from the 14-month high of 174.50 but remains well-supported near 174.00. The technical analysis points to a continued bullish bias, reinforced by the 14-day RSI above 50, the nine-day EMA acting as support, and the ascending channel pattern.
Upside targets include the recent high of 174.50, the channel’s upper boundary at 174.70, and potentially the all-time high of 175.43. Conversely, a break below the nine-day EMA at 173.55 could expose the pair to downside risk towards the lower boundary of the channel at 172.40 and the 50-day EMA at 171.84.
Despite the weaker German PPI data, EUR/JPY demonstrates resilience, emphasizing the importance of technical factors in shaping short-term price action. Traders should closely monitor key support and resistance levels, as well as momentum indicators, to gauge the pair’s next potential move in this ongoing bullish trend.
