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EUR/JPY Forecast: Is it Safe to Buy the EUR to JPY Dip?

The euro is collapsing as concerns about the Eurozone economy continue. The EUR/JPY pair crashed to a low of 137.14, which was the lowest point since June 2. It has fallen by over 4.28% from its YTD high. Similarly, the EUR/USD price is nearing parity while the EUR/CHF has moved to the lowest level in years.

BOJ and ECB actions

The EUR to JPY exchange rate has crashed as investors watch the actions by the ECB and the BOJ. The ECB has been a bit dovish because of the risky situation that the European economy finds itself in. Consumer and business confidence have fallen as the cost of energy has continued rising. As a result, there are existential risks to many companies in the bloc.

Analysts expect that the ECB will start hiking interest rates in the coming meeting. While most of them expect a 0.50% rate hike, some believe that the likely scenario is for the bank to hike rates by 0.25%. Another expectation is that these rate hikes will have a negative impact on many struggling countries like Greece and Spain. 

Meanwhile, the EUR/JPY is also reacting to the actions by the Bank of Japan. Unlike the ECB, the BoJ has insisted that easy-money policies are necessary since the economy is recovering at a slower pace than its peers. Still, analysts believe that the BOJ will start to intervene in the next few months since the weaker yen is hitting many importers.

The EURJPY price will today react to the upcoming minutes by the ECB. These minutes will provide more color about what the bank’s officials concluded during the previous meeting, The next ECB and BOJ interest rate decisions will happen on July 21st.

EUR/JPY forecast

In my previous EURJPY forecast, I warned that the pair was ripe for a major pullback. This forecast was accurate. The four-hour chart shows that the EUR to JPY price formed a triple-top pattern at 144.33. In price action analysis, this pattern is usually a bearish sign. Now, the pair has managed to move below the chin of this pattern at 138. Such a move is a sign that bears are in control.

At the same time, the pair has moved below the 25-day moving average while the MACD has continued dropping. Therefore, the pair will likely keep falling as sellers target the key support level at 136, which is about 2% below the current level. The stop-loss for this trade is at the resistance at 139.96.