The Euro staged a nice rally this past week as Greek negotiations are closer to a deal with its European creditors that will unlock vital financial aid to Athens and secure the country’s future in the Eurozone. Greece is due to repay €200m to the IMF on Wednesday, and a further €750m later this month.
While the Bank of Japan (BOJ) didn’t adjust rates at its previous meeting, it clearly notices that its economy is suffering. Inflation measures, exports, and wage growth all remain weak, which is weighing on economic activity as a whole. If the current trend continues, BOJ will be forced to act again with further easing policy and weakening the yen. With this prospect, Japan’s currency will likely remain weak against its major trading peers in coming months.
EURJPY initially rose on Friday’s session but found enough selling pressure at 135.274 to give back some of its gains but closed still in the green in the middle of the daily range. The pair is in a recovery phase and is getting ready for another potential phase change, from recovery to accumulation phase. Stochastic in showing an overbought market but even with the pair well into overbought territory, we should not fight the strong upward correction.
Expecting an upward move to a daily resistance at 137.641 on a break above Friday’s high at 135.274 (scenario 1) or a bounce from a daily support at 133.073 could throw the pair to a daily resistance at 136.523.