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A decrease in the EUR/JPY exchange rate is about to occur as recession fears grow. It is now over 138.00

Alina Haynes

Jul 07, 2022 14:43

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The EUR/JPY currency pair is doing poorly during the Tokyo session. The cross is bouncing around a narrow range of 138.26-138.60 after recovering from its low of 137.27 on Wednesday. Generally speaking, bears are in charge of the asset. The pair has fallen during the last week as a result of failing to overcome the 144.00 resistance level, which has been a barrier for four weeks.

 

The chance of a recession in the eurozone has significantly increased as a result of the Bank of England's (BOE) negative assessment of the global economy. The BOE believes that price volatility in raw materials and energy might lead to economic disruptions in the future. The negative outlook of a Western central bank is fundamentally harmful to the FX market. The shocks to the economy would undoubtedly harm the eurozone as well because it forbids the import of Russian oil.

 

Along with fears of a recession, the common currency's bulls are also plagued by disputes over gas supplies between the economies of Europe and the United Kingdom. The British government has said that it would stop exporting gas to Europe if shortages develop there in the upcoming months.

 

The underperformance of the wage-price notion in Tokyo worries the Bank of Japan (BOJ). In order to keep inflation rates close to target levels, according to the BOJ, pay increases are required. If not, families would face greater price pressures, which would result in a decrease in the overall volume of demand.