EUR/JPY clears daily losses amid sour market sentiment

The EUR/JPY found support at a low of 155.06 and then recovered to 156.60.
European and German PMIs came in weaker than expected.
Soft inflation figures and monetary policy divergence weights on the Yen.

Patricio Martín FXStreet

Despite initial losses, the EUR/JPY pair managed to regain ground, climbing from a low of 155.06 to 156.60 and closing with mild losses. Weaker-than-expected figures from the US, UK and the Eurozone seem to be having a greater impact on the Yen as the USD/JPY rose to monthly highs. In addition, monetary policy divergence between the European Central Bank (ECB) and the Bank of Japan (BoJ) applies further selling pressure to the JPY.

Sour market mood and monetary policy divergence weights on the Yen

In June, Germany and the Eurozone witnessed a contraction in manufacturing sector activity at an increasing rate, as indicated by the declining HCOB Manufacturing PMI to 41 and 43.6, respectively. While HCOB Services PMIs remained above the expansion threshold of 50, they significantly retreated compared to May levels to 52.4 and 54.1.

In addition, weak results were seen in the US and the UK, which contributed to a negative market environment. That being said, global bond yields are declining, indicating higher demands for bonds, while stock indexes are retreating. In that sense, the German DAX (DAX) dropped 0.99% as well as the Japanese Nikkei Stock Average, falling by more than 1%.

Adding to the weakness of the Japanese Yen, soft inflation figures remind investors that the BoJ may maintain its dovish stance. The National Consumer Price Index and Core Inflation for May have fallen short of expectations, dropping to 3.2% YoY and 4.3%, respectively. Looking forwards, investors will eye the speeches of central bankers from the BoJ and ECB next Wednesday at the ECB Sintra Forum where they will look for clues regarding the next steps from both bank’s monetary polices.

EUR/JPY Levels to watch

Based on the daily and weekly chart, the EUR/JPY has a clear, more favourable outlook against the Yen. In both charts, the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are both in overbought conditions suggesting that the buyers have control while the pair trades above its main moving averages. However, a downward technical correction shouldn’t be taken off the table for the upcoming sessions.

Upcoming resistance for EUR/JPY is seen at the area 156.90 level, followed by the 157.50 zone and the psychological mark at 158.00. On the other hand, immediate support for the cross is seen at the 155.50 zone, followed by the 155.00 area and the 154.00 level.

EUR/JPY Daily chart

EUR/JPY

Overview
Today last price	156.65
Today Daily Change	-0.14
Today Daily Change %	-0.09
Today daily open	156.79

Trends
Daily SMA20	151.6
Daily SMA50	149.68
Daily SMA100	146.47
Daily SMA200	144.73

Levels
Previous Daily High	156.93
Previous Daily Low	155.61
Previous Weekly High	155.27
Previous Weekly Low	149.67
Previous Monthly High	151.62
Previous Monthly Low	146.14
Daily Fibonacci 38.2%	156.43
Daily Fibonacci 61.8%	156.12
Daily Pivot Point S1	155.96
Daily Pivot Point S2	155.13
Daily Pivot Point S3	154.64
Daily Pivot Point R1	157.27
Daily Pivot Point R2	157.76
Daily Pivot Point R3	158.59

Author

Patricio Martín

FXStreet

Patricio is an economist from Argentina passionate about global finance and understanding the daily movements of the markets.

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