Market News & Analysis
EUR/JPY Coiling for a Breakout?
Matt Weller, CFA, CMT November 6, 2019 11:05 PM
In an otherwise quiet news day, the emerging theory that Europe’s economy may be stabilizing got some support from the updated Eurozone PMI reports.
As for Germany, the Eurozone’s most important economy, the final Services PMI report for October was revised up to 51.6, with the equivalent report for the Eurozone as a whole rising to 52.2. These readings are notably lower than the mid-50s readings we were seeing earlier this year, but they remain in positive territory. Separately, Germany reported 1.3% m/m growth in Factory Orders, well above the 0.1% reading expected, suggesting that the beaten-down manufacturing sector of the economy may be stabilizing as well.
While this morning’s reports are potential “green shoots” for the Eurozone economy, they’re second-tier releases/revisions. Traders will be looking for continued improvements in economic data as we head into next week, with Germany’s ZEW Survey (Tuesday) and Preliminary GDP reading (Thursday) on tap.
As it stands, the euro is generally shrugging off this morning’s reports. Keying in on EUR/JPY, rates have spent the last three weeks consolidating in a tight 100-pip range between previous resistance at 121.40 and support down at 120.40:
Source: TradingView, City Index
The tight consolidation following a strong rally through mid-October is a constructive development, giving the pair time to work off its excessive bullish sentiment, but it’s worth noting that the pair remains within a longer-term downtrend since peaking above 137.00 back in early 2018.
Given the conflicting short- and long-term trends, the eventual breakout from the current 100-pip range will be key to determining the near-term bias for EUR/JPY. A confirmed break above 121.40 resistance (especially if supported by continued improvement in Eurozone economic data) would open the door for a move up toward 123.00 next, whereas a bearish breakdown through 120.40 support could lead to an unwind of the October rally and a retracement back toward 119.00 or lower next.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.
Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.
Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.