EUR/JPY leads with FOMC minutes in sight as US Dollar strengthens

  • EUR/JPY bears moved early in the week.
  • Eyes on the US dollar and the FOMC minutes.

EUR/JPY is bearish at the start of the week with a lack of momentum to move the needle so far. At 135.27, the price is slightly in the red, slipping from a high of 135.51 to a low of 135.10. The Euro is under pressure as the US Dollar strengthens due to central bank divergences.

On Friday, the nonfarm payrolls arrived with positive revisions and another drop in the unemployment rate. Despite a lack in the headline, the majority of the data was strong and supported the notion in the market that a hawkish Federal Reserve is here to stay. Subsequently, this supports the greenback.

431,000 new jobs were added against an estimate of 490,000. However, data on job increases in February has been revised upwards. In addition, the unemployment rate fell to 3.6%, the lowest since February 2020. The DXY index which measures the greenback against a basket of currencies was higher for the second consecutive day after two consecutive days down and trading near 98.50. This month’s cycle high near 99.418 should eventually be tested.

Meanwhile, stock markets ended the week strong. Markets ended last week with the S&P 500 up 0.3%, the Euro Stoxx 50 up 0.4% and the FTSE up 0.3%. The 10-year US Treasury yield gained 4 basis points to 2.38%. However, global data points to persistently high inflation.

Eurozone inflation hit a record high of 7.5% in March. Energy costs jumped 44.7% year-on-year. At the same time, goods excluding energy increased by 3.4% and services by 2.7%. Nonetheless, the divergence to date between the European Central Bank and the Federal Reserve is more supportive of a lower EUR/USD rate weighing on the EUR/JPY pair.

“The latest price data indicates central banks certainly have work ahead of them,” analysts at ANZ Bank said. ”In the meantime,” however, say the analysts, ”it really seems like it’s time for the European Central Bank to act. While the ECB will be cautious about raising rates, it certainly looks like it should act sooner to scrap its QE program, which only adds fuel to the inflationary fire, which is already enough. hot.

Eyes on the FOMC Minutes

Analysts at TD Securities explained that “Fed officials began the process of policy normalization by raising rates 25bp to 0.25%-0.50% at the March meeting.”

“The FOMC pulls no hawkish punches in its policy guidance, with Chairman Powell also hinting that further information on QT plans will be provided in the minutes (possibly including details on caps). We continue to await an official announcement from QT at the FOMC meeting in May.

EUR/JPY technical analysis

The price has corrected into daily support, so the bulls might be about to move in.

EUR/JPY S1

From a lower term perspective, the bulls will need to clear immediate resistance for a run through the 136.00 area and towards 138.00

Comments are closed.