EURO has bounced off on fresh economic reports. The single currency managed to gain momentum over JPY, but such bullish momentum is seen as part of retrace while the bearish trend is still quite strong.
Recently, EURO German PPI report has been published. It indicated an increase to 0.5% from the previous figure of -0.1% which was expected to be at 0.4%. Report on the Eurozone Current Account sunk to 24.7B from the previous figure of 27.9B which performed better than expected. The Consumer Confidence index also showed growth to -7 which was expected to be unchanged at -8. Eurozone is struggling with the economic slowdown because of Brexit uncertainty and the European Union Elections. The parliamentary election is expected to have a big impact on the gains of the euro. Eurosceptic parties are widely expected make a strong showing, which could hamper approval of the next European Commission president and budget.
European Central Bank Vice President Luis de Guindos recently stated that with Eurozone growth slowing, several countries should force their banks to build extra capital buffers to mitigate the risk of unexpected shocks. The slower growth momentum being observed increases the risk of tail events, in other words, shocks that are unlikely to occur, but would have a significant impact on the financial system and the economy if they did.
Japan's economy is affected by the trade war decision. US auto imports restrictions are expected to impact the US and global economy adversely. Bank of Japan's board member Harada recently stated that the central bank must ramp up stimulus "without delay" if a slowdown in the economy hampers the achievement of its price target. The tax rate hike is likely to come into force from October 2019. Harada showed deep concerns about the weakening of exports and output. If the trend continues, it will damage the economy as well as job growth rate and consumption rate significantly. Harada said those who argued that the BOJ's ultra-loose policy was ruining financial institutions ignored the benefits of monetary easing to the economy.
Today Japan's Core Machinery Orders report was published. It demonstrated a significant growth to 3.8% from the previous value of 1.8% which was expected to decrease to 0.0%. The report on Trade Balance also showed an increase to -0.11T from the previous figure of -0.15T which was expected to be at -0.12T.
JPY asserted strength following the release of strong economic data. The Eurozone, however, is struggling with the slower growth but positive economic signals ahead of Parliamentary Election. Volatility in the pair EUR/JPY is expected.
Now let us look at the technical view. The price managed to gain certain bullish momentum rejecting off the 122.50 support area with a daily close recently. The price is currently being held by the dynamic level of 20 EMA as resistance which is expected to lead to the continuation of the bearish momentum which could lead the price lower towards 122.50 area. If it is broken with a daily close, further bearish momentum is expected to with a target towards 120.00 support area in the future.
