EUR/JPY renews two-week low around 141.00 on downbeat yields, Eurozone inflation eyed
- EUR/JPY drops for the fourth consecutive day as bears keep reins at the lowest levels in fortnight.
- Rush to risk-safety underpins bond, USD buying ahead of EU inflation data.
- Japan data join weak yields to exert additional downside pressure.
- Preliminary readings of Eurozone HICP for June will be important to watch, risk catalysts are the key.
EUR/JPY takes offers to refresh the fortnight low around 140.90 during early Friday morning in Europe. The yen cross traces moves of the Treasury yields amid the market’s pessimism surrounding the economic path forward.
That said, the US 10-year Treasury yields reverse the early Asian session rebound during the four-day downtrend to 2.967%, the lowest level in three weeks. In doing so, the benchmark US Treasury yields portray around 50 basis points (bps) of a fall from June’s peak, suggesting a heavy rush towards bond-buying, mainly due to its safe-haven status.
The risk-off mood could also be witnessed via a nearly 1.0% intraday loss of the S&P 500 Futures and the Euro Stoxx 50 Futures.
Earlier in the day, Japan’s Tokyo Consumer Price Index (CPI) rose to 2.3% versus 2.2% expected and 2.4% prior in June while the nation’s Unemployment Rate for May increased to 2.6% compared to 2.5% market forecast and previous readings. Further, the Tankan Large Manufacturing Index for the second quarter (Q2) of 2022 slumped to 9 versus 13 expected and 14 prior.
Additionally, Nikkei came out with the news suggesting that Japan's tax revenue in the Financial Year 2021 reached a record 67 trillion yen.
On the other hand, German Retail Sales for May dropped below -2.0% market forecast to -3.6% YoY, versus -0.4% previous readings whereas the Eurozone Unemployment Rate declined to 6.6% versus 6.8% expected and 6.7% prior.
Looking forward, the flash estimations of the Eurozone key inflation gauge, Harmonised Index of Consumer Prices (HICP), expected to refresh all-time high with 8.3% figure versus 8.1% prior, will be important to watch for clear directions.
Should the inflation data continue to rise faster, the recent comments from European Central Bank (ECB) policymaker Robert Holzmann could push the buyers to take risks as the Bank of Japan (BOJ) is determined to keep the status-quo. During an interview with Austrian newspaper Oberoesterreichische Nachrichten, ECB’s Holzmann also said, per Reuters, “From my Austrian point of view, I would have preferred earlier moves on interest rates but I am only one of 25 at the European Central Bank (Governing Council)."
Also read: Eurozone Inflation Preview: Core holds the keys, with 4% set to trigger a EUR/USD rally
Technical analysis
EUR/JPY justifies a clear downside break of the 142.00 support confluence, now resistance, comprising 20-DMA and an ascending support line from May 12.
That said, the latest downside eyes a confluence of the 50-DMA and four-month-old support line near 138.80. During the fall, the 140.00 round figure may offer an intermediate halt.