EURJPY is plunging 0.9% today, amid a spike in Japanese yen and a pullback in euro. Japanese yen received support from wage data.
Growth in Japanese cash earnings accelerated from 0.8% YoY in December 2023 (revised lower from 1.0% YoY) to 2.0% YoY in January 2024. This is a big acceleration, especially given that markets expected growth to reach 1.2% YoY. Real cash earnings were 0.6% YoY lower in January, but markets expected a drop of 1.5% YoY. Meanwhile, Japanese Trade Union Confederation said that its affiliated unions demand an average wage increase of 5.85% in this year's wage talks, the biggest increase in 30 years. Wage data as well as demand for large wage increase greatly boost the chance of a positive wage and inflation cycle being confirmed. This would be a strong hawkish factor for Bank of Japan. Moreover, BoJ Governor Ueda said that chance of achieving inflation target, a key factor for policy normalization, is gradually increasing. Markets are increasingly pricing in a chance of Bank of Japan ending negative rates as soon as at March meeting, with such a move being priced in by money markets in 78% now, up from less than 60% yesterday.
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Open account Try demo Download mobile app Download mobile appTaking a look at EURJPY chart at D1 interval, we can see that the pair slumped below 161.70 support zone today and is trading at 3-week low. However, declines were halted at the 50-session moving average (green line) and the pair recovered slightly later on. A break below this moving average would pave the way for a test of a key near-term level - the lower limit of the Overbalance structure in the 159.90 area, which is guarding the uptrend. The pair may see some additional volatility in the early afternoon today when ECB announce rate decision (1:15 pm GMT).
Source: xStation5
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