10:22 AM · 20 December 2022

Chart of the day - EURJPY (20.12.2022)

Bank of Japan surprised markets today with a decision to widen the band around target 10-year yield from 25 basis points to 50 basis points. While interest rates were left unchanged, the decision to revamp yield curve control tool can be seen as very hawkish as it effectively equals a rate hike of up to 25 bp (given that BoJ kept intervening at the upper band). Japanese yen strengthened significantly in response with USDJPY, EURJPY and GBPJPY all dropping 3% at one point.

Taking a look at EURJPY chart at D1 interval, we can see that the pair dived today and broke below the support zone ranging around 200-session moving average and 50% retracement of the upward impulse launched in August 2022. A key support to watch now is psychological 140.00 level, that is additionally strengthened by the lower limit of the Overbalance structure. A break below would, at least in theory, signal a bearish trend reversal and a potential for a deeper drop.

Source: xStation5

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