EURJPY broke over 123.32 rather easily and then moved up very strongly. The pair went as high as 126.97. The weekly closing was at 126.62.
Recent economic releases from Euro zone and Japan.
The latest economic releases from the Euro zone and Japan clearly indicate an edge for the Euro.
Latest economic data from Euro zone:
- German Gfk Consumer Confidence Survey: 5.8, positive as compared to the forecasts as well as the previous 5.7.
- Consumer Confidence: -23.8, same as the consensus and better than the previous -26.3.
- German Retail Sales (YoY): -4.7%, negative as compared to the forecasts (-1.6%) as well as the previous -0.6%.
- German Unemployment: Unemployment change in January was -16K and better than the consensus of 8k and previous -2K. Unemployment rate dropped to 6.8% from 6.9%.
- Consumer Price Index (YoY): - prelim: 1.7%, negative as compared to the forecasts (2.0%) as well as the previous 2.1%. Same with the month on month change of -0.5% against the consensus of -0.4% and previous 0.9%. Year on year harmonized CPI (prelim) was 1.9% against the consensus and previous 2.0%.
- Markit Manufacturing PMI: German PMI 49.8 and positive as compared to the forecasts (48.8) as well as the previous 46.0. Same with Euro zone's PMI which was 47.9 against the consensus of 47,5 and previous 46.0.
- Consumer Price Index (YoY) Prelim: 2.0%, negative as compared to the forecasts as well as the previous 2.2%.
- Unemployment Rate: Remain unchanged at 11.7% though the consensus was for a rise to 11.9%.
Recent economic releases from Japan
- Retail Trade: Year on year retail trade was 0.4% and though slightly better than the consensus of 0.3% but was quite less than the previous 1.2%. The change in larger retailers' sales in December was 0.0% against the previous 0.9%.
- Nomura/JMMA Manufacturing PMI: 47.7 against the previous 45.0.
- Industrial Production (YoY) - prelim for December: -7.8% against the previous -5.5%. The month on month change was 2.5% against the consensus of 4.5% and previous -1.4%.
- Labor Cash Earning (YoY): -1.4% against the previous -0.8%.
- Vehicle Production (YoY): -17.2% against the previous -8.4%.
- Housing Starts (YoY): 10.0%, as compared to the forecasts (13.5%) as well as the previous 10.3%.
- Overall Household Spending: -0.7%, negative as compared to the forecasts (-0.3%) as well as the previous 4.1%.
- Unemployment Rate: 4.2%, negative as compared to the forecasts as well as the previous 4.1%.
The strong upward momentum keeps the outlook bullish for EUR/JPY. The continued support at 5-week EMA level support this outlook and the recent break over the price action channel indicate that the upward momentum has gained strength. Please check this EUR/JPY update. The next target for EURJPY is expected to be 127.92. Please note that the resistance zone of 126.30 to 127.92 had proved to be a very strong resistance during March end to April 2010. With any decisive break over 127.92 the currency pair should target a test of 130.00 psychological level.
Fundamentally the economic data from Japan continue to be weak and technically the new emerging support pattern during past week has been support of 5-day EMA. Only one day the pair had tried to break that level but immediately jumped up to close over that level. On the downside any break below last Friday's low of 124.83 will represent a break of this pattern. Such a break will also indicate that the psychological support of 125.00 is not strong. In such case we will expect some more downward consolidation but will expect a strong support over 121.22. This level is not only the support level of last week but also brings in the support of current 22-day EMA. Since November 15th and downward consolidation has been finding support near 22-day EMA. On the downside any break below this will come as the first sign of a break in the upward journey but not the end of the road as for past 11 weeks the price action has been over 5-week EMA. The current 5-week EMA is just above the psychological level of 120.00. Please check the above mentioned alert for the same.
On the downside any break below psychological 120.00 will represent a break of the above mentioned trend. Such a break will come as the signal for reversal. Please note that we do not expect it in the near term.
Please note that the above EUR/JPY weekly forecast is the view of the author and is not presented as an investment advice.
By: Himanshu Jain
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.