EUR/JPY Technical Analysis
About the EUR/JPY (EURO & Japanese Yen)
The EUR/JPY pair is the abbreviated term used for the Euro and Japanese Yen this pair doesn't have a nickname. Before we get into the particulars, what exactly does the EUR/JPY rate mean? The exchange rate tells you how many Japanese Yens (the quote currency) are required to purchase one EUR (base currency). For example, if the pair is trading at125.06, it means it takes 125.06 Japanese Yens to buy 1 Euro.
Breaking Down ‘EUR/JPY’
The euro (€; EUR) is the official currency of 19 of the 28 member states of the European Union. The euro is the second largest and second most traded currency in the foreign exchange market after the United States dollar. The euro is divided into 100 cents.
Whereas, the Japanese Yen is classified as a safe haven currency. Before the financial crisis of 2008, several investors would take advantage of ultra-low interest rates from the Bank of Japan to borrow massively in Yen and invest the money abroad.
The Euro vs. the Japanese Yen. The Yen is a historically low-yielding currency, leading traders to borrow cheaply in JPY to purchase higher-yielding currencies, including EUR. Because of this, the pair is sensitive to the broad-based market view trend fluctuations. Volatility may be found in news related to the Eurozone debt crisis and from the Bank of Japan’s anti-deflation policy efforts introduced in 2013.
What Determines the EUR/JPY Exchange Rate?
Several factors can impact the EUR/JPY rate valuation, including
ECB & BOJ Monetary Policies The bank of the European Central Bank and Bank of Japan control the supply of money in the market, to keep the economy on track. A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency.`
Economic Events: The movement in the European and Japanese economic events determine the exchange rates. Top of the line economic events includes GDP Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Euro & Japanese yen, causing fluctuations in the EUR/JPY exchange rate.
Correlation is merely a mutual relationship or connection between two or more things.
Positive Correlation – The positive relationship merely is when pairs move in tandem with each other.
In the forex world SGD/JPY, CAD/JPY, and SEK/JPY currency pairs are positively correlated. It's because all these pairs have a Japanese yen in the numerator. So, any change in the EUR will be reflected in these pairs.
Negative Correlation – In contrast, a negative relationship is when forex pairs move in the opposite direction. For example, USD/PLN, USD/CNH, USD/CAD
The euro is one of the most important alternatives to the U.S. dollar among fiat currencies (the EUR/USD currency exchange rate is one if the most often traded pairs in the world). This is why there is often a positive link between the euro and gold: both assets are negatively correlated with the greenback. However, the relationship is far from being a perfect correlation, This is because gold is not merely an alternative against the U.S. dollar, but also against the current monetary system based on fiat currencies. Therefore, in some cases the euro and the dollar both lose (or gain) ground against gold.
What Determines the EUR/JPY Exchange Rate?
Several factors can impact the EUR/JPY rate valuation, including:
ECB & BOJ Monetary Policies: The European Central Bank and the Bank of Japan control the supply of money in the market, to keep the economy on track. A dovish policy, which is also known as expansionary policy, from either of the central banks, weakens the related currency. In contrast, a hawkish monetary policy (contractionary policy) strengthens the currency.
Economic Events: The movement in the Euro and Japanese economic events determine the exchange rates. Top of the line economic events includes GDP, Employment Change, Industrial Production, and Consumer Price Index. Better than forecast data increases the demand for related currency and impacts the value of either the Euro or the Japanese Yen, causing fluctuations in the EUR/JPY exchange rate.
Major Economic Events:
Gross Domestic Product – the Gross domestic product is the central measure of economic growth in the region.
Employment Change – Both of the currencies are sensitive to changes in employment, as slacks in the labor market cause a drop in Inflation rates.
Consumer Price Index – Since one of the goals of the ECB and BOJ is to maintain price stability, they keep an eye on inflation indicators such as the CPI. If the annual CPI deviates from the central bank’s target, the ECB or the BOJ could make use of their monetary policy tools to keep inflation in check.
The balance of Trade – Europe has an extremely robust trade sector, so currency traders and bank officials alike tend to watch changes in the country’s export and import levels.
Political announcements &; natural disasters – Besides the scheduled economic events, political elections, new systems, wars, terror incidents, natural calamities, etc. can all cause severe variations within the EUR/JPY.
Standard lot Size: 100,00
Mini lot size: 10,000
Price minimum increment: 0.001
Pip Value: $9.00