EUR/JPY downtrend intact, rallies likely anomalies
Nov 21 (Reuters) -Despite rallies like that seen Wednesday, the EUR/JPY downtrend looks to be intact. With the European Central Bank still in rate-cutting mode and the Bank of Japan likely to hike again in December, the prognosis is for continuing EUR/JPY moves to the downside.
The ECB is seen cutting its policy refinance (and deposit) rate 25 basis points to 3.00% in December and to 2.00% or lower by end-2025 nL6N3MK0LE, nL1N3MR0DR. The fall in Eurozone inflation to 2% year-on-year in October makes this most possible nS8N3LQ0D3.
The BOJ, on the other hand, looks to be on course for a 25 bp rate hike at its December 18-19 Policy Board meeting nL6N3M604E, nL1N3M70H0. Growth is expected to improve and inflation to remain sticky above the BOJ's 2% target in Q4 2024.
EUR/JPY has been trending down since the rally from 155.17 on September 16 to 166.65 on October 31. It popped from the 161.50 low on November 19 to 164.71 Wednesday but has since reverted lower.
The Fibonacci 38.2% retracement of the 155.17-166.65 move is at 162.26, a level already achieved on the 19th. The 50% retracement is at 160.91 and Fibo 68.2% retracement at 159.55.
The weekly chart shows EUR/JPY back in its 160.11-164.67 Ichimoku cloud. The prognosis is for the cross to eventually break below, possibly heading for a test of the ascending 100-weekly moving average at 157.61.
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EUR/JPY daily: https://tmsnrt.rs/4fC83xs
EUR/JPY weekly: https://tmsnrt.rs/3UWvzgj
Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Ewen Chew
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