The EURJPY currency pair experienced a staggering 3% decline on Monday, shedding approximately 520 pips from its daily peak of 171.60. This sharp downturn occurred despite the closure of the Japanese market in observance of Showa Day, marking a rare instance of significant movement during a national holiday.
The pair, which opened at 168.80, is now trading below its initial value, raising concerns among traders about unexpected volatility and its potential implications for the currency markets.
The sudden plunge in EURJPY coincided with the anticipation surrounding the release of Germany's Consumer Price Index (CPI) data for the month. Economists had predicted a rise of 0.6% compared to the previous month's 0.4%, fueling expectations of a stronger Euro against the Japanese Yen.
However, the market's reaction appeared contrary to these expectations, as EURJPY experienced a precipitous drop of 3% within a mere two-hour window leading up to the CPI data release. Analysts suggest that this unexpected movement may indicate either thin trading volumes due to the Japanese holiday or a preemptive response to potentially disappointing CPI figures.
Technical indicators further highlight the turbulence in the market. The Bollinger Bands, a measure of volatility, expanded significantly following the plunge, underscoring the heightened uncertainty among traders. Additionally, the Exponential Moving Average (EMA) 50, a key technical indicator, began to bend towards the EMA 200, signaling potential shifts in market momentum.
Both the Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) indicators exhibited bearish signals. The RSI, nearing the 40% threshold, suggests increasing bearish sentiment, while the MACD histogram's decline toward the zero line indicates diminishing bullish momentum.
As trading activity resumes and investors await the release of the German CPI data, EURJPY remains in the spotlight, with market participants closely monitoring developments for further insights into the currency pair's direction amid the ongoing market turbulence.
Forecast 0.6% vs Previous 0.4%
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