The EURJPY saw a strong rally this week after the news of a potential vaccine for coronavirus. The pair moved 225 pips higher to test the 125.00 level but has now pulled back towards 124.00. A move above the resistance level is still possible in the days ahead.
A vaccine arrival by the end of the year would remove the demand for safe havens such as the Yen, but would also improve the outlook for the growth expectations of the Eurozone economies. Central banks would also reduce their quantitative easing programs and possibly avoid a move to negative rates.
Today will see another estimate for third-quarter GDP in the Eurozone with traders looking for a quarterly figure of 12.7% after a loss of -11.8% in Q2. The year-on-year number is expected to show a drop of -4.3%. The recent return to lockdowns in the Eurozone has taken the importance out of the third quarter numbers as analysts consider the damage to the Economy in the fourth quarter. However, a better-than-expected number this time could still see a boost for the Euro.
The EURJPY would benefit from a continued bullish tone in stock markets but this isn’t assured as the vaccine hype recedes due to the near-term risk of higher cases in the United States after two days of record cases. Another risk for indices is the confusing election picture. Traders have been betting on a large stimulus package in 2021, but even if they win a run-off election for the open Senate seat in Georgia, the Senate is still heading for Republican control.
The EURJPY pressed the 125.00 resistance this week and pulled back to the 50-day moving average where it may be finding support. If the pair closes higher today then a long position with a stop below Thursday’s high could be a could low risk and high reward trade with channel resistance near 129.00. The Investing Cube team is currently available to help all levels of traders with the Forex Trading Course or one-to-one coaching.
