EUR/JPY: common currency underpinned, cross headed back to recent highs?

EUR/JPY recovered from the bearish opening gap and has reasserted itself within the bullish reversal of the 125.80.

EUR/JPY has rallied from the April lows down at 114.84 to the aforementioned highs with a more bullish tone around the EZ economy and a more settled political environment in the EU for the time being. The ECB has also been tipped to change their stance on monetary policy and that too has added to the direction of the cross. The broader sentiment should keep the dollar on the backfoot and underpin the euro. However, the yen will garner strength during risk aversion and eyes will remain focused on developments around Trump and Brazil this week.

• CFTC positioning data: net buyers of dollars - ANZ

EUR/JPY levels

Valeria Bednarik, chief analyst at FXStreet explained that the pair set a fresh 1-year high this past week at 125.80. "In the daily chart, indicators erased the extreme overbought conditions, but turned back north within positive territory, whilst the price stands far above its 100 and 200 DMAs both slowly turning up. In the same chart, Thursday's decline was quickly reversed, with the price holding above the 23.6% retracement of its latest rally at 123.20, another indication of strong buying interest around the common currency."

EUR/JPY 4 hour chart

Bednarik explained that the 4 hours chart shows that Momentum heads north within positive territory. " The RSI eased around 55, this last, reflecting the low volumes late Friday rather than suggesting an upcoming downward move."