EUR/JPY consolidates above the 20-day SMA at the start of the week

On Monday, the EUR/JPY rose to a weekly high above 157.00 amid JPY weakness across the board. On the other hand, the EUR traded weak against most of its rivals, including the USD, AUD and GBP, on the back of falling German yields following mixed European economic activity data.

Investors assess high-tier economic data from Germany and the EU

Mixed Eurozone data was reported on Monday. German Retail sales contracted but at a higher pace than expected, with the headline figures declining by 0.8% MoM in June while markets expected 0.2%. In addition, the Eurozone preliminary Q2 Gross Domestic Product (GDP) came in slightly higher than expected at 0.3% QoQ vs the 0.2% expected and the previous 0.1% contraction.

On the inflation front, the Core Index of Consumer Prices rose to 5.5% YoY in July, higher than the 5.4% expected and matching the previous 5.5% figure. In addition, the headline Harmonized Index of Consumer Prices (HICP) declined in July by 0.1%. Still, the European Central Bank (ECB) members are reported to be concerned about the sticky Core inflation, which is not retreating. Reacting to the data, German bond yields slightly decreased, which made the EUR trade with losses against most of its rivals. 

On the Japanese front, the JPY continued to weaken against most of its rivals following Friday’s Bank of Japan (BoJ) dovish take. In that sense, the Japanese central banking authority stated that they would allow some flexibility in their Yield Control Curve (YCC). Still, it wasn’t a step towards normalising the monetary policy. Governor Ueda commented that the bank “was nowhere near” pivoting its dovish stance as inflation numbers are still well behind the bank's estimates. That being said, monetary policy divergence between its peers, such as the Federal Reserve (Fed), European Central Bank (ECB), and Bank of England (BoE) should continue to weaken the Yen.

EUR/JPY Levels to watch

The daily charts indicate a short-term bullish momentum. The Relative Strength Index (RSI) is positioned in positive territory with an upward slope while the Moving Average Coverage Divergence (MACD) indicator shows slight fading red bards, indicating a bullish trend. On the broader look, the pair is trading above the 20,100 and 200-day Simple Moving Average (SMA), suggesting the strength of the bulls.

Resistance levels: 156.50, 157.00,157.50.
Support levels: 155.78 (20-day SMA), 155.500, 155.00.

EUR/JPY Daily chart