EUR/JPY trading above 130.50 ahead of EU’s data on Wednesday

Coming up next for euro traders, the preliminary Eurozone and German Markit PMI and the preliminary German Gross Domestic Product for May, all scheduled on Wednesday.
EUR/JPY technicals suggest a mild upward bias with 130.60 as demand zone.

Flavio Tosti Independent Analyst

The EUR/JPY currency cross is trading at around 130.78 down 0.12% this Tuesday.

EUR/JPY found an intraday ceiling at 131.37 in early Europe and then retreated to the 130.70 region where the cross was ranging earlier in Asia.

EUR/JPY is mainly mimicking EUR/USD which is having a rebound on the back of USD short covering.

The euro currency overall remains negatively affected by the recent lackluster macroeconomic data and the political situation in Italy. On the broader picture, investors are quite worried as the 5 Star and League coalition said they intended to fight the Eurozone’s budget guideline, ask the European Central Bank to write-off the Italian debt and take control of the immigration policy in Italy.

However, the euro and Italian equities had a small rebound as the two populist leading parties proposed Giuseppe Conte for Prime Minister.

Euro traders will pay attention to the preliminary Eurozone and German Markit PMI (Purchasing Managers' Index) monthly Composite, Manufacturing and Services reports for May as well as the preliminary German Gross Domestic Product for May. If that data comes in above-estimates it should support EUR in the short-term. The numbers are due this Wednesday. In Japan, the Nikkei Purchasing Managers' Index (PMI) is scheduled for 00:30 on Wednesday but the tier-two data should not be a major market-mover.

As the yen is seen as a safe-haven currency the recent positive developments over the US-China trade war are not supportive of the Japanese currency.

Overnight in Asia, Bank of Japan’s officials made some hawkish comments. BoJ's Governor Haruhiko Kudora said he intended to exit the current ultra-loose monetary policy if the inflation rises in Japan while Bank of Japan Deputy Governor Masazumi Wakatabe commented: “my feeling now is that we can achieve our inflation target with the current policy.” Although the comments sound hawkish, market participants have not rushed to buy the yen as the BoJ has made those remarks many times without really making any changes to its monetary policy.

EUR/JPY 4-hour chart

EUR/JPY is trading above its 50 and 100-period simple moving averages (SMA) on the 4-hour time-frame but below its 200-period SMA, suggesting a mild upward bias. Support is seen at 130.60 demand level and at 129.53 swing low while resistance is priced in at 131.37 swing high and at 132.00 and 133.00 figures.

Author

Flavio Tosti

Independent Analyst

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