The euro has gone through a sharp rally against the Japanese yen this week. The pair extended its recovery from early March lows at 124.40 to test 131.90 resistance level, with the year-to-date high, at 133.15, on sight. The Bank of Japan has confirmed its ultra-expansive monetary policy at its latest monetary policy meeting on Friday. The bank pledged to maintain its huge stimulus program in spite of the increasing inflation trends. With most of the world’s major central banks shifting towards monetary tightening, the BoJ's stance is crushing yen demand.

The EUR/JPY achieved to break above the 78.6% Fibonacci retracement, which sat at 131.27 and left the Japanese yen vulnerable to further weakness, which indeed happened. The EUR/JPY rallied short the 132.00 figure, though retreated and is trading above 131.52 Thursday’s close.

The EUR/JPY path of least resistance is upwards, and the first resistance would be 132.00. Breach of the latter would expose the downslope trendline around the 132.70-80 area, followed by the February 10 at 133.15.

The cross gathered extra upside traction following the recent breakout of the 200-day SMA (129.98). The surpass of the 131.90 area could also likely allow EUR/JPY to attempt an assault of the 2022 top at 133.15  (February 10).

Yen's weakness has been boosting the EUR/JPY to extend its rally for the sixth consecutive day, despite the sourer market mood on the back of the lack of progress on the Russia – Ukraine peace talks, which has increased negative pressure on the euro.

EURJPY Can Experience a Sell-Off Below 132.0-132.63

Mar 19 2022