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Euro Jumped lower on weak HICP

Market Analysis


Eurozone jobless rate dropped to 8.8% in October from 8.9% in the previous month. Further signs that the labour market is improving and with PMI readings suggesting ongoing job creation as companies run into capacity constraints the improving trend is likely to continue. Eurozone prel Nov HICP inflation rose to 1.5% y/y from 1.4% y/y in the previous month, less than expected and with core inflation holding at 0.9% y/y, rather than nudging higher to 1.0% y/y, as Bloomberg consensus suggested. National data had been mixed and while the German rate came in a tad higher than anticipated, French and Spanish numbers ahead of today’s Eurozone release came in below estimates, and with the breakdown showing that the uptick in the headline rate was largely due to a rebound in energy price inflation, which jumped to 4.7% y/y in November from 3.0% y/y, the doves at the ECB will see this as a confirmation that underlying inflation pressures remain muted.

EURJPY, despite success in unemployment data, fell to 132.65 from 133.17 following the miss in EMU November HICP inflation.  Two strong bearish candles have been identified in the hourly chart, while the 3rd consecutive candle broke the 20-period MA but it closed above 20 MA. This 3rd candle is a long legged doji  candle which closed bullishly, (umbrella Doji candle), presenting the evidence of buying pressure despite the majority of seller around. Buyers resurfaced at the bottom of the hour and they successfully pushed prices 30 pips above the low of the day.

Hence with RSI at 61, and the pair moving above 20-period MA, an intra-day position  at 132.95 was taken with a target at 133.20 and support at 132.75. The EURJPY is in a positive outlook the last two days, hence this drift lower identified earlier, could be considered as simply a correction move of the uptrend. The crossing is moving in the upper Daily Bollinger Bands pattern since yesterday and above 50-Day MA.  Hence this intra- day position complies with the high-term judging by the RSI on the 4-hour chart and Daily chart.

The EURJPY faces a strong resistance at 133.25, which was reached 4-times the last 2 weeks. Hence another attempt at 133.25 high is anticipated within the day, after the latest bullish hourly candle seen. If the pair however manage to breach and break this 2-weeks resistance , then further upside momentum anticipated up to the next Resistance seen since September at 133.80-134.00. However on a possible upside failure of pair’s price action to break above 133.25, will indicate a retest of the support seen since September at 131.50.

Today’s closure, will be in the watch list for a possible Daily entry of the pair.

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Stuart Cowell

Senior Market Analyst


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