- EUR/JPY retreated near the 158.00 area, seeing more than 0.70% losses on the day.
- Alongside the NZD, the JPY is one of the session’s top-performer.
- Tightening expectations for the ECB remain low. Eyes on Lagarde, August PMIs.
In Tuesday’s session, the EUR/JPY lost ground and retreated near the 158.20 area. Higher Japanese yields contributed to the JPY trading strong while the Euro traded soft. Investors await fresh catalyst in the August PMIs figures from August from Germany and Japan to be released on Wednesday.
On the Euro front, the European currency is trading weak against most of its rivals, as investors are taking profits following back-to-back sessions of tallying gains against most of its rivals. For the rest of the week, investors will eye Manufacturing and Services S&P Global and Hamburg Commercial Bank (HCOB) figures from August, which are expected to decelerate. On Friday, Christine Lagarde will speak at the Jackson Hole Symposium, and Germany will release its final Q2 Gross Domestic Product figures estimates.
As for now, tightening expectations from the European Central Bank (ECB) remains low. World Interest Rates Probabilities (WIRP) indicates that markets are discounting 55% odds of a 25bps increase in the upcoming September 14, 2023 meeting from the ECB. Looking forward, the chances of a 25 bps hike stand at 75% in October, followed by an 85% probability of a 25 bps hike in the December meeting. This rate hike path would leave the target rate at 5%.
On the other hand, the Yen recovered ground against its rivals, as the Japanese Government Yields (JGB) rose to their highest level since 2014, including the 10-year rate rising past 0.60%. Those moves may suggest that markets are expecting a potential pivot, but the Bank of Japan (BoJ) hasn’t delivered any signs of leaving its accommodative approach. As for now, they expect higher inflation and wages to start tightening, so in the meantime, monetary policy divergences may continue weakening the JPY in the short term.
EUR/JPY Levels to watch
The EUR/JPY suggests a neutral to bearish technical outlook on the daily chart as bullish momentum wanes. The Relative Strength Index (RSI) shows a negative slope above its midline, and the Moving Average Convergence Divergence (MACD) displays fading green bars. On the bigger picture, the pair is above the 20,100,200-day Simple Moving Average (SMAs), indicating that the buyers are in command.
Support levels: 158.00, 157.50, 157.00.
Resistance levels: 159.00, 160.00, 160.50.
EUR/JPY Daily chart
-638283346261619101.png)
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.