EURJPY analysis: approaching a dangerous zoneThe yen maintains its positive momentum by attracting buying flows from investors seeking refuge in safe-haven currencies as global recession fears grow.
The yen also received additional support after Bank of Japan Deputy Governor Masayoshi Amamiya acknowledged last week that the BoJ should begin considering tools to end ultra-expansionary monetary policy, though the actual change is unlikely to occur anytime soon.
In addition to the dollar, the Japanese yen is strongly regaining ground also against the euro, with EUR/JPY now trading at late May levels and down about 6% from June highs.
The appreciation of the yen against the euro occurred despite the ECB's 50-basis-point rate hike in July, leaving the BoJ as the only major central bank that has not yet raised rates. Japan has remained more isolated from worrying energy risks in Europe, where the clouds of an impending economic recession are gathering.
The 10-year yield spread between Germany and Japan has fallen to 0.6%, the lowest since mid-May, as Bund yields have collapsed in response to data indicating a bleak economic picture in the Eurozone.
Technically speaking,tThe formation of a triple top at the end of June ended the EUR/JPY currency pair's multi-year uptrend, and the breakout of the neckline support at 137-137.5 solidified the trend reversal bearish pattern. The RSI is dangerously pointing down, but it still doesn't show that technical conditions are oversold. The next level of support is seen at psychological 134, followed by 132.7 (May 12 lows).
