The ECB is set to cut interest rates by 25 bps on December 12 to focus on reviving economic growth and help deal with political instability in the region. On the other hand, the Bank of Japan is still uncertain on whether they hike or hold rates which might create an uncertain path for EUR/JPY.
Several ECB officials have expressed concerns about the risk of inflation falling short of the bank’s target, driven by a weak economic outlook. The ECB has already reduced the deposit rate by 75 bps this year, and Thursday’s anticipated cut would mark the third consecutive reduction.
Market participants expect the Eurozone economy to underperform due to political uncertainty in Germany and France, the largest economies in the bloc. Additionally, concerns are growing about the potential impact on the export sector, particularly with the uncertainty surrounding US President Donald Trump’s administration and its policies once he takes office.
BoJ officials reiterated a data-dependent approach for another interest rate hike which creates uncertainty for the Yen. The Yen rebounded after data showed Japanese wholesale inflation accelerated, which might support the case for a Bank of Japan interest-rate hike next week.
BoJ officials stated that they are not against a rate hike if proposed and see a small risk in postponing a rate hike which might weaken the Yen which are considered dovish comments.
Technical Analysis
Source: TradingView
Price is trading near resistance at 160, a key level that traders are closely watching. If the price fails to hold above 160, it may pull back. Additionally, the 200 EMA remains above the price, suggesting that the downtrend could still be intact.
Bulls may target the 161.5 resistance level if the price continues to rise. The pivot point at 158.1 could act as support if the price falls further from resistance. Bears may aim for the 156.6 support level if the price fails to maintain its gains.
