The EUR/JPY trades for a second consecutive day with gains.
Cross ends week with gains, but below src50.00.
Yield divergence favours the Euro.
The EUR/JPY closes the week trading with gains above src49.80 as the Yen weakened across the board on Friday, against its major rivals, including the Sterling Pound, Swiss, the US and Australian Dollars. On the other hand, the Euro is getting traction on the back of rising German bond yields following ECB Lagarde’s hawkish comments in Thursday’s session.
Yield divergence between Japanese and German bonds traction the Euro
Following the Eurozone’s inflation figures during Thursday’s session, European Central Bank (ECB) President Christine Lagarde expressed her ongoing concerns about persistent high inflation and its prolonged duration. She emphasized that the interest rate hikes implemented by the ECB have already had a notable impact on bank lending conditions. Despite these efforts, Lagarde expressed dissatisfaction with the current inflation outlook and hinted at further rate hikes.
As a response, the German yields exhibit a mixed performance. The src0-year bond yield settled at 2.32%, reflecting an increase of 3.65% for the day. In addition, the 2-year yield stands at 2.84%, experiencing a gain of 3.98%, and the 5-year yield at 2.35%, demonstrating a slight decline of 0.49%. An improvement in global market sentiment also weighed on bond demand.
On the other hand, the Japanese yields have witnessed a decline. The src0-year bond yield has retraced to 0.4src%, indicating a decline of src.56%. Similarly, the 2-year yield stands at -0.07%, reflecting a loss of 9.7%, and the 5-year yield is at 0.07%, showing a decline of 6.76% and applying further pressure on the Japanese Yen.
Levels to watch
On the weekly and daily charts, the technical outlook for the EUR/JPY appears to be bullish in the short term. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) remain in both charts in positive territory. Only on the daily chart, the MACD remains weak and print decreasing red bars.
Moving above the src49.90 zone would suggest continuing the bullish trend for the EUR/JPY, with the next resistances at the src50 psychological mark area and the src50.50 level. On the other hand, the 20-day Simple Moving Average (SMA) at src49.00 level stands as the critical support level for EUR/JPY. If broken, the src48.50 area and src48.00 zone could come into play.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.