EUR/JPY bears appear determined to break the multi-month-old support line as the quote drops to 140.75 as Tokyo opens for trading on Tuesday. The cross-currency pair’s latest weakness could be linked to its failure to cross the 200-Exponential Moving Average (EMA) despite bouncing off an upward-sloping support line from early August 2022.

Not only a retreat from the 200-EMA but the bearish MACD signals also keep the EUR/JPY sellers hopeful of breaking the aforementioned key support, around 139.35 by the press time.

Following that, the 61.8% Fibonacci retracement level of the pair’s May-October 2022 upside, near 138.65, can act as an additional filter towards the south.

In a case where the EUR/JPY remains bearish past the key Fibonacci retracement level, also known as the golden ratio, the sellers won’t hesitate to aim for August 2022 low surrounding 133.40.

Meanwhile, the 200-EMA and 38.2% Fibonacci retracement could challenge the EUR/JPY pair’s recovery moves around 141.00 and 142.40.

Should the pair buyers keep the reins past 142.40, the odds of witnessing a run-up towards the three-month-old horizontal resistance area surrounding 143.00 will be crucial to watch for further upside.

Meanwhile, traders focus shifted to the FOMC’s monetary policy decision. The Fed has the challenge of providing stable prices and financial stability. Given that inflation stays at three times the Fed’s target, the Fed could take a page of the Bank of England’s (BoE) blueprint for handling financial stability.

Last year, the BoE had to step up and provide liquidity to calm the markets. Yet the BoE tightened monetary policy in November and hiked rates by 75 bps.

A minor pullback can be expected before a higher swing

Mar 21 2023