The EUR/JPY cross has rebounded, breaking a two-day decline during the early European session on Monday. The positive momentum follows remarks by European Central Bank (ECB) Chief Economist Philip Lane over the weekend, suggesting that the ECB might gather crucial data by June to decide on a potential series of interest rate cuts. However, Lane cautioned against premature actions, warning that such moves could prove counterproductive. Investors, nevertheless, are speculating on a potential earlier-than-expected interest rate cut by the ECB.
At present, EUR/JPY is trading at 159.25, marking a 0.36% gain for the day.
Analyzing the four-hour chart, the bullish outlook for EUR/JPY remains intact as the cross maintains its position above the 50- and 100-hour Exponential Moving Averages (EMA). The positive sentiment is further supported by the 14-day Relative Strength Index (RSI), which sits above the 50 midline, indicating favorable prospects for further upside movement.
The primary resistance level is identified near the January 10 high and the psychological milestone at 160.00. A breakthrough above the latter could trigger a rally towards the upper boundary of the Bollinger Band at 160.15, with potential for further gains to the December 1 high at 161.77.
On the downside, a critical support level lies at the confluence of the lower limit of the Bollinger Band and the 50-hour EMA in the 158.30–158.40 range. Further south, the next significant support is positioned at the 100-EMA at 157.95. A breach of this level may lead to a decline to the January 9 low at 157.20. Traders are advised to monitor these key levels for potential shifts in market dynamics.
