is a very volatile pair and it has been making some huge moves in the last couple of months. Although the trend continues to remain bearish, as the highs keep getting lower. In December we saw a 9 cent crash in this pair, as the JPY surged on the Bank of Japan making a change in bond spreads. Markets took that as the beginning of the shift in the BOJ policy, from a really accommodative stance to a more tightening one.

But, last week the BOJ made it clear that it is not tightening its monetary policy yet. This pair has displayed a strong bullish momentum after the Bank of Japan (BOJ) kept the monetary policy unchanged, with interest rates unchanged at -0.1% and the 10-year Japan Government bonds (JGBs) target at around 0%.

Traders were expecting hints about an exit from the ultra-loose monetary policy, but they left everything unchanged, which sent the JPY lower and this pair higher. The price surged more than 400 pip higher, and buyers are facing the 200 SMA (purple) on the H4 chart. This moving average has acted as resistance before, rejecting the price, so we might see a bearish reversal from here, although it will mostly depend on the JPY.

The Euro has been bullish, with the ECB still remaining on a fast tightening cycle, planning to raise rates by 50 basis points (bps) for a couple of meeting at least. ECB’s Lagarde made a comment

Comments from the ECB President Christine Lagarde

• Inflation in Europe is far too high
• We must bring inflation down and deliver on our goals
• We will stay the course to ensure the timely return of inflation to our target

Two influential ECB governing council members spoke about back-to-back 50 bps hikes yesterday. So, the market is pricing in a 90% chance of 50 bps in the next meeting in early February with the 10% remaining at 75 bps.

EUR/JPY Live Chart