The EUR/JPY trading pair has been subject to a series of events that have affected its price dynamics, including the Bank of Japan’s monetary policy and inflation forecasts. As we delve into the technical analysis of this currency pair, we’ll explore the recent price data and various indicators that can provide insights into its potential future movements.

EUR/JPY Price Action Overview

Over the past few weeks, EUR/JPY has displayed a mixed trend. From the mid-July low of $153, the pair has seen a significant appreciation, currently trading at around 155. However, the recent retreat from the monthly high of 158, observed four days ago on Friday, raises questions about its short-term direction.

Support and Resistance Levels

The immediate support for EUR/JPY stands at the current level of 155. However, given the recent downside movement, there’s a possibility that bears could breach this support, paving the way for further declines towards the psychological level of 154. The worst-case scenario for the pair would involve retesting the 50-day Simple Moving Average (SMA) at 153, which had acted as a strong intraday low on July 12.

Technical Indicators

1. Relative Strength Index (RSI): Currently at 52, the RSI indicates a neutral stance for the currency pair. This implies that the market is in a balanced state, lacking a clear dominance of either the bulls or the bears.
2. Moving Average Convergence Divergence (MACD): With a sell signal at 0.687, the MACD suggests a bearish sentiment for EUR/JPY. The downward movement in the MACD histogram reflects a potential continuation of the current downtrend.
3. Indicators: The indicator summarized analysis reveals 7 sell signals, 10 neutral signals, and 8 buy signals. While the neutral signals imply uncertainty, the preponderance of sell signals suggests a bearish bias in the market sentiment.
4. Oscillators: The oscillator analysis indicates 1 sell signal, 9 neutral signals, and 1 buy signal. Similar to the indicators, the predominance of neutral signals reflects indecision among traders.
5. Moving Averages: Among the moving averages, there are 6 sell signals, 1 neutral signal, and 7 buy signals. The higher number of buy signals indicates potential support for the currency pair.

Bank of Japan’s Influence

The Bank of Japan’s upcoming monetary policy decision is a crucial factor that may significantly impact the EUR/JPY pair. The expectation of leaving the ultra-accommodative policy unchanged implies that the central bank may maintain its current stance, which could influence market sentiment.

Inflation Forecasts and the Future Path

Traders should keep a close eye on the latest inflation forecasts as they could provide valuable hints about the Bank of Japan’s future monetary policy actions. Any surprises in the inflation outlook may lead to sharp market movements and further impact EUR/JPY’s trajectory.

Conclusion: EUR/JPY technical analysis

In conclusion, the technical analysis of EUR/JPY suggests a mixed outlook with a slightly bearish bias. The recent retreat from the monthly high and the strong downside movement may pave the way for further declines, with immediate support at 155. 

Traders should closely monitor the 50-day SMA at 153 as a critical level to watch for potential reversals. The upcoming Bank of Japan policy decision and inflation forecasts will play a significant role in determining the pair’s future path. Given the current neutral stance in the indicators and oscillators, cautious trading strategies are advised until a clearer direction emerges in the market.