Strategy
Buy EUR/JPY at 130.50 for 133.40. Stop at 129.20.
Technical View
Price, after hitting a high at 133.47, has been on a decline. The decline has brought price close to the Fibonacci 62%. The decline has managed to stay above the cloud, keeping the uptrend intact. Conversion and base lines had a bullish crossover earlier and is still in a bullish trend. Lagging span confirms the bullish trend as it is above the price of 26 days ago as well as above the cloud. Elliott wave-wise, price is in a possible 4th wave correction and as long as price stays above 130.00, the bullish outlook is intact. MACD remains bullish. If price can stay above the cloud support as well as the Fibonacci 62% correction point, there is a good chance for price to re-test 133.47 again in the next few months.
Fundamental View
Currencies movements are to a certain extent determined by the country’s bond yields. Investors buy a higher currency to buy its bond for a higher yield. The Eurozone central government bond has a higher yield compared to the Japanese government bond. This warrants buying the Euro over the Japanese yen.
The European Central Bank is more likely to raise interest rate compared to the Japanese central bank. Inflation is currently running higher in Eurozone compared to Japan. With greater inflationary pressure in Eurozone compared to Japan, we can expect the European Central Bank to hike rate before the Bank of Japan.
The Eurozone economy is also likely to outperform the Japanese economy. Going by Statista estimate for 2021, the Japanese GDP is forecasted to grow 2.36% while the Eurozone economy is forecasted to grow at 4.36%. All the fundamental numbers point to buying the Euro against the yen.