Eurjpy Drops On Boj Rate Hike Hopes

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Eurjpy Drops On Boj Rate Hike Hopes

Eur/Jpy Drops Near 165.40 On Boj Rate Hike Hopes

The steep descent of EUR/JPY continues even today as the cross is now sitting near 165.40, a level only seen on 6th May. It is safe to say that the EUR/JPY cross is under heavy selling pressure, similar to USD/JPY and GBP/JPY.

Right now, the market is full of rumors and expectations that the BoJ will hike the interest rate at the next meeting. These rumors have forced many investors to unwind their short-selling positions of Japanese Yen (JPY).

Eur/Jpy Extends Its Loss For 5th Day In A Row

Additionally, the market is going through a risk-off phase, as evidenced by the decline in the US equities. Also, the Asian markets show a weaker tone which also highlights the safe haven status of the Japanese Yen (JPY). Amidst all of this, it makes sense for the EUR/JPY to trade in loss for the 5th day in a row.

Meanwhile, the Chinese economy is also under the spotlight due to slower growth and weak demand. The recently released PMI for China also proved that not everything is alright with the Chinese economy.

According to experts, the softer inflation prints in the EU keep the prospects of a September rate cut alive. So if we look at the bigger picture, the BoJ is expected to raise the rates at the next meeting. Conversely, the ECB may resort to a rate cut on accounts of lower inflation.

All of this points at one thing - More downside for the EUR/JPY with the next possible targets at 165.00, 164.50, and then the 164.00.

However, the EUR/JPY's D1 chart shows that the RSI is now hovering in the oversold territory. This is a sign that technical correction might be just around the corner, sending the EUR/JPY higher.

However, the fundamentals still support a bearish EUR/JPY. So, even if we get a short-term bullish trend in the EUR/JPY, it will not last long.

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