EUR/JPY erases daily losses amid sour sentiment

In spite of the US session’s negative market sentiment, the EUR/JPY pair has managed to reverse its daily losses. The EUR/JPY pair has rebounded to 156.60 after finding support at a low of 155.06. The PMIs for Germany and Europe were weaker than anticipated. The Yen is weighed down by low inflation rates and monetary policy divergence.

The EUR/JPY pair rebounded from early losses, hitting a high of 156.60 and a low of 155.06 before closing with slight losses. Additionally, it appears that the Yen is being affected more strongly by the US, UK, and Eurozone’s weaker-than-expected economic statistics as the USD/JPY reached new monthly highs. Different monetary policies between the Bank of Japan (BoJ) and the European Central Bank (ECB) increase selling pressure on the JPY.

The decreasing HCOB Manufacturing PMI to 41 and 43.6, respectively, in early June suggested that manufacturing sector activity was contracting in Germany and the Eurozone at an increasing rate. The HCOB Services PMIs decreased slightly from May levels to 52.4 and 54.1, however they nevertheless maintained above the growth criterion of 50.

Additionally, disappointing results from the US and the UK were observed, which added to the unfavourable market environment. As a result, while stock indices are decreasing, global bond yields are declining, signaling increased demand for bonds. In this regard, both the Japanese Nikkei Stock Average and the German DAX (DAX) are trading with losses of over 1% each.

Soft inflation numbers remind investors that the BoJ may maintain its dovish attitude, further contributing to the decline in the value of the Japanese Yen. The May National Consumer Price Index and Core Inflation, which decreased to 3.2% YoY and 4.3%, respectively, fell short of forecasts. Investors will be watching the statements of the BoJ and ECB central bankers at the ECB Sintra Forum next Wednesday in anticipation of information on the future of both banks’ monetary policies.

The EUR/JPY has a clear, more favourable outlook against the Yen based on the daily and weekly chart. The Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI) are both overbought in both charts, indicating that the buyers are in charge.

The 156.90 level is expected to be the next area of resistance for the EUR/JPY, followed by the 157.50 region and the psychological milestone at 158.00. On the other hand, the 155.50 zone, the 155.00 region, and the 154.00 level show quick support for the cross.