EUR/JPY extends gains above 133.00 at highest since December 2015

EUR/JPY continued with last week rally and rose to 133.42, reaching the highest level since December 2015. The pair remains near the highs, holding a strong bullish tone. 

A combination of a resilient euro and a weak yen boosted the pair on Monday. Rising US bond yields and equity prices in Wall Street continue to support gains in USD/JPY.

EUR/JPY looking for new levels 

The pair broke a key resistance level on Friday, opening the doors to more gains. From Friday’s low, EUR/JPY has risen almost 300 pips. The bullish tone remains strong but technical indicators are showing extreme oversold readings. 

To the upside, the next resistance levels might be located at 133.40/45 (daily high),  133.75/80 (Dec 16 & 18 2015 high) and 134.55/60 (Dec 2015 highs). On the flip side, support might now be seen at 133.10 (Sep 15 high), 132.60 (European session low) and 132.00 (Sep 13 high). 

Key events ahead 

Two events could trigger volatility in EUR/JPY in the coming days. On Wednesday, the Fed’s decision on monetary policy. No change in rates is expected, however, some announcement regarding the balance sheet seems likely. The statement and Yellen’s press conference might have a large impact on currencies and yields. 

On Thursday will be the turn of the Bank of Japan that is not expected to change policy. “The BOJ does not need to buy JPY80 trillion of JGBs a year to keep the 10-year yields in a 10 bp band around zero.  Some see this as evidence of stealth tapering.  We are not convinced that this is the best way to understand what the BOJ is doing, but we recognize the BOJ has been reluctant to formally acknowledge this by scaling back its announced target”, said analyst from Brown Brothers Harriman.