FOREX: EURJPY Base Building, Scope for Stronger Retracement Towards 160.00

Feb-27 10:24

As noted, USDJPY has shown above a down trendline drawn off the Feb12 high, showing early signs of some bullish momentum building for the pair. Underpinning this theme, the December low ~148.65 (although pierced) has held, with multiple attempts below the 149.00 handle proving short-lived.
Indeed, ING suspect that USDJPY can try and build a floor in the 148.70/149.00 area. They state that unlike last July/August, speculative positioning is now actually getting stretched long yen, potentially suggesting the short-term path of least resistance is higher for Cross/JPY.
With this in mind, it is worth highlighting that EURJPY has continued to hold trendline support, drawn from the August 2022 lows, while the cross has been unable to close below the 156.00 mark despite multiple tests below.
Furthermore, a firmer relative stance from US President Trump on EU tariffs appears to be having less of an impact on the resilient Euro. Some desks this week have become less bearish on the single currency, and an important area of resistance has been building around 1.0530 for EURUSD. A break of this level would build signal scope for a stronger reversal higher for EURJPY.
Initial firm resistance to watch is 158.40 (20-day EMA), and key resistance intersects at 159.95 (50-day EMA), closely matching with the prior psychological pivot at 160.00. Tokyo CPI is due overnight.

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