EUR/JPY reversal from 161.85 is contained above the 160.80 support area
The Euro loses steam as German Producer Prices drop beyond expectations.
In Japan, the soft inflation data is weighing on a sharper JPY recovery.
EUR/JPY faces a significant resistance at 161.80.
The Euro retreated against the Japanese Yen ahead of Friday's European session opening. Weak German PPI data weighed on the Common currency, which found buyers in the upper ranges of 160.00.
German Producer Prices declined 1.2% in November and 8.6% year-on-year, well beyond the 0.5% monthly and 8% yearly decline anticipated by the market.
These data confirm the deflationary trend observed by ECB policymakers at the minutes of the last monetary policy meeting and are contributing to keep Euro upside attempts limited, despite the brighter market sentiment.
In Japan, the Nationwide CPI corroborated the soft inflation figures shown by last week’s Tokyo reading. The core inflation eased to a 2.3% yearly pace, its lowest level in one and a half years, suggesting that next week’s BoJ monetary policy meeting will be a non-event.
EUR/JPY Technical Analysis
The broader trend remains bullish although the pair faces a strong resistance at the 161.85 area. This is the 78.6% Fibonacci retracement of the late 2023 sell-off, often a target for corrective movements.
Support levels at 160.65 and 160.00 are keeping bears at bay for now. A break below 158.45 would cancel the positive view.
On the upside, above 161.85, the next targets are 162.30 and 162.95.
Technical Levels to Watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
