The EUR/JPY cross built on previous session’s sharp recovery move from 6-week lows and surged past the 124.00 handle to 8-day tops.
The cross continued gaining traction on Friday after the BoJ left its monetary policy unchanged by keeping rates steady at -0.10% and maintaining 10-yr JGB yield target at 0.00%. The central bank upgraded its assessment of private consumption and overseas growth, signaling confidence that economic recovery would broaden and continue gaining momentum.
Market, however, seems to have been disappointed after BOJ Governor Kuroda reassured that the central bank was not ready to start discussing exit strategy as the inflation is still far from reaching the 2.0% target. The dovish comments attracted some fresh selling interest around the Japanese Yen.
This coupled with a slight improvement in investors’ appetite for riskier assets, as depicted by positive trading sentiment around European equity markets, was also seen weighed on the Japanese Yen’s safe-haven appeal..
Meanwhile, a modest recovery witnessed around the EUR/USD major, during early European session, further collaborated to the pair’s sharp up-tick in the past hour or so. With the key BoJ monetary policy announcement out of the way, traders now look forward to the final Euro-zone CPI print for some fresh impetus.
Technical levels to watch
A follow through momentum beyond 124.30 level is likely to get extended towards 124.55-60 resistance area, above which the cross seems all set to aim towards reclaiming the key 125.00 psychological mark.
On the flip side, 123.85-80 area now seems to protect immediate downside, which if broken could drag the cross back towards 123.40-35 horizontal support en-route 123.00-122.90 strong support.