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EU data in Line, EURO remains weak

Market Analysis

EURJPY,H1

Eurozone April HICP inflation was confirmed at 1.2% y/y, down from 1.3% y/y in March. Core inflation also came in unchanged from the preliminary reading at 0.7% y/y, down from 1.0% y/y in March. The breakdown showed the energy price inflation accelerated in April, and services price inflation fell back to 1.0% y/y from 1.5% y/y. The latter is likely due to temporary factors and the earlier timing of Easter this year, which saw holiday related price increases for package holidays in particular, falling back earlier. So some noise also in the inflation data and while the headline rate is far below the ECB’s target underlying inflation is slowly picking up, leaving the ECB on course to end QE this year.

EURJPY has come under pressure, led EURUSD selling, which has generated broader euro supply. The cross posted a five-day low at 130.08, making a big intra-week decline, by breaking the initial Support and the 23.6% fibonacci level, at 130.30. Given that EURJPY is treded below 20-Day MA since April 30, and given that the Geopolitical issues also remain of heightened interest in the Mideast and on the Korean peninsular, with Pyongyang having suspended high-level talks with Seoul, the pair is likely to continue traded lower. Next support is at 129.95 and 12940, which is 2 months low. Only a break above 50-Day MA and the latest swing high at 131.31, could suggest a reversal of the Daily downtrend

The hourly chart, is more of the same, with Resistance level at the 200-period EMA at 130.35. Hence only a break above that could suggest a retest of the PP level at 130.75.

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Andria Pichidi

Market Analyst

HotForex

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