EUR/JPY broke its eighth straight day of decline and is hovering around the 130.00 level
The pair has been under pressure from an upward US dollar backed by inflation data. In addition, the adjusted decline in US Treasury yields also contributed to the negative trend. The US dollar will strengthen on Tuesday as it continues to hold its 16-month high near 95.40. Meanwhile, US Treasury yields were moderated by mixed market sentiment ahead of the release of US retail sales data this afternoon.
In addition to data on US retail sales, market sentiment will also be influenced by future data on the gross domestic product (GDP) in the euro area and a speech by European Central Bank (ECB) President Christine Lagarde. According to previous data, industrial production in the Euro zone fell 0.2% m/m in September and 5.2% in the last 12 months. Japan reported weak third-quarter GDP data and Bank of Japan (BOJ) Governor Kuroda hinted that the COVID-19 financing program could be phased out.
Meanwhile, the dollar continued to strengthen. The reason could be a hint that the Fed will cut rates at the November 23rd FOMC meeting. This has weakened the yen’s attractiveness as a safe haven. The pair’s price movement could be a tailwind due to US President Joe Biden’s $1 trillion bipartisan infrastructure bill.
Eurozone News reported that the escalating Belarusian border crisis along the border with Poland is escalating geopolitical tensions in Europe. ECB officials also continue to view inflationary pressures as temporary. The Netherlands also initiated a three-week lockdown over the weekend, Austria quarantined unvaccinated people, and Germany’s infection rate hit an all-time high. All of this has somehow affected the euro, and as a result, the euro has shown relatively low dynamics recently.
More broadly, the advance at 114.42 (2020 low) is still ongoing, with strong support from the 55-week EMA confirming the medium-term bullish sentiment. Further growth is expected to reach 137.49 (2018 high). A decisive break in this area will resume all long-term gains at 109.03 (2016 lows). The next target would be a 100% forecast from 114.42 to 142.88 and from 109.03 to 137.49. It will now be the preferred option as long as support remains at 127.91.