EUR/JPY: Euro Weakens Amid German PMI Disappointment and French Crisis
Market Overview
EUR/JPY has faced significant downside pressure, driven by deteriorating sentiment surrounding the eurozone. Political instability in France has deepened as infighting among internal parties threatens to derail the government’s budget deficit reduction plan, leading to increased market apprehension. This environment has weakened the euro significantly. At the same time, Japan’s inflation outlook and economic resilience lend weight to the possibility of another interest rate hike by the Bank of Japan, maintaining a relatively stronger yen. These combined factors have resulted in a downward trajectory for the EUR/JPY pair.
Technical Analysis
The EUR/JPY pair has plunged to a fourteen-month low following a decisive bearish candle that broke below the previous support level of 157.957 on the hourly chart. This sharp decline demonstrates the sellers’ dominance and puts further downward targets into play. As long as the bears can maintain control below this breached support, immediate targets stand at 157.677, followed by 157.539, and ultimately 157.281.
The overall technical setup points towards continued bearish momentum, supported by the price being firmly below key moving averages. Momentum oscillators also indicate a weak environment for euro buyers. The Relative Strength Index (RSI) remains below the 30 level, highlighting oversold conditions but with no immediate sign of a rebound. Similarly, the MACD is firmly in the negative territory, with the signal line remaining well below the MACD line, reinforcing the negative sentiment in the market.
Conversely, should the buyers succeed in reclaiming market control, a break above 158.215 would be the first step towards reversing the bearish outlook. Overcoming this resistance could pave the way for a potential test of the higher ceiling at 158.633, which, if breached, would invalidate the current downtrend and restore a bullish bias.
Key Levels
- Resistance Levels: 157.957, 158.215, 158.633
- Support Levels: 157.677, 157.539, 157.281
Key Events to Watch
Investors remain focused on unfolding political developments in France, as these could impact the euro’s trajectory significantly. Moreover, European Central Bank (ECB) President Christine Lagarde’s speech will be in the spotlight, potentially offering new insights into the ECB’s monetary policy stance. Compounding the pressure on the euro, Germany’s Manufacturing PMI came in below expectations at a recessionary level of 43, further clouding the outlook for the eurozone economy and intensifying downside pressure on EUR/JPY.
Conclusion
EUR/JPY is under notable bearish pressure, driven by ongoing political turmoil in France and disappointing German data. The path forward will largely depend on sellers maintaining control below the broken support at 157.957. Any potential recovery would require buyers to decisively reclaim higher levels, beginning with 158.215.
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