- EUR/JPY is consolidating close to recent highs above the 136.50 mark on Monday in quiet, holiday-thinned trade.
- “Until the BOJ changes its ultra-dovish stance… monetary policy divergence argues for continued yen weakness,” one analyst said.
- Technicians are eyeing a possible bullish breakout above the 137.00 level and a push towards 140.00.
EUR/JPY is consolidating close to recent highs above the 136.50 mark on Monday in quiet, holiday-thinned trade (European markets are shut for Easter), with 137.00 still acting as a ceiling, as has been the case of the last few sessions. Japanese policymaker rhetoric regarding recent yen weakness was in focus during Monday’s Asia Pacific session and continues to offer little hope for the EUR/JPY bears.
Analysts have said that a key reason for recent yen weakness is the BoJ’s relatively dovish stance versus its increasingly hawkish G10 peers. Though the bank will acknowledge rising inflation pressures at its policy meeting later this month, no changes are expected to its flagship negative interest rate and yield curve control policies. BoJ Governor Haruhiko Kuroda on Monday acknowledged that a weaker yen could hit profits, but that it remained premature to debate an exit from its ultra-accommodative policies.
Meanwhile, Japan’s Finance Minister Shunichi Suzuki emphasised that the BoJ’s aim is achieving its inflation target, not manipulate currency rates. “We see low risk of FX intervention,” said analysts at BBH Global Currency Strategy. “Until the BOJ changes its ultra-dovish stance, the monetary policy divergence argues for continued yen weakness and intervention would likely have little lasting impact,” they added.
Technicians have argued that over the past few weeks, EUR/JPY has formed an ascending triangle, a pattern often associated with a bullish breakout. For now, the ceiling of this pattern is the 137.00 level. A break above here would open the door to a swift test of the 2018 highs in the 137.60s and then a push towards 140, a level the pair last traded at in 2015.