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EURJPY faces resistance in pre-release of CPI Flash Estimate report

EURJPY has slowed down on its bullish momentum after staying positive for three consecutive days. The bulls have faced some rejections at the strong resistance level of ¥139.05. The price seems to be falling from this point during the Asia session today. Investors are currently awaiting the outcome of the Euro CPI Flash Estimate to determine the next direction for this pair.

The prospect of hiking the interest rate for the Euro more aggressively by over 75 basis points next month during the ECB meeting has been the main factor driving the price of the Euro against the Japanese Yen. This has restricted the Yen from benefiting so much against the Euro yesterday despite the stable unemployment change rate witnessed for the Japanese economy.

The outcome of the Euro CPI Flash Estimate will essentially be one of the main factors influencing the performance of EURJPY today.

The Consumer Price Index (CPI) Flash Estimate is an important economic data that gives an estimated value of the changes in prices of goods and services offered to consumers. This data is essential to investors as it examines the inflation rate. Investors are usually attracted to reports on the inflation rate based on its influences on the monetary policy committee in setting the interest rate higher; therefore, the CPI flash estimate reading is expected to influence the ECB decisions in September. Higher readings from CPI Flash Estimate will likely attract more investors into Euro in the hopes of getting a higher interest rate when the monetary policy committee hikes the rate in September. The forecast for this data is 9.0% while the previous record was 8.9%.

The Core CPI Flash Estimate which also measures the changes in the prices of goods and services offered to consumers excluding food, energy, tobacco, and alcohol will also be released alongside this report today. The Core CPI Flash Estimate report is equally important as it helps in highlighting the main area where the greater inflation rate seems to have come from. The forecast for this data is 4.1% while the previous record was 4.0%.

Aside from these major factors to influence the performance of EURJPY in the market today, there are other minor factors to exert their own influence too on the performance of EURJPY in the market for the rest of the week. These factors will come from the Eurozone and Japanese data. We have highlighted these factors in the last paragraph as well.

What impact will the Euro CPI Flash Estimate have on EURJPY?

The CPI Flash Estimate as we have mentioned above provides useful data in measuring the Euro inflation rate. Investors are usually attracted to the higher inflation rate as it will influence the ECB to take more aggressive action toward hiking the interest rate for the Euro. This means we can expect more upside movements for EURJPY should the CPI Flash Estimate come higher today.

On the contrary, lower reading from the CPI Flash Estimate will discourage investors that the ECB might slow down the rate of the interest rate hike due to a lower report on the inflation rate. In this case, we can expect more downside for EURJPY.

Potential factors affecting the performance of EURJPY today

A. Eurozone:

  • German Import Prices m/m: This measures the changes in the prices of German imported goods purchased domestically. Higher readings from this data will cause a more bullish trend for EURJPY. The forecast for this data is 1.6% while the previous record was 1.0%.
  • French Consumer Spending: This measures the changes in the values of inflation-adjusted goods and services purchased by consumers. Higher reading from this report will support a more bullish trend for EURJPY. The forecast for this data is-0.3% while the previous record was 0.2%.
  • French Prelim CPI m/m: The measures of the changes in the prices of goods and services offered to consumers in France today. Higher reading from this report will cause more bullish momentum for EURJPY. The forecast for this data is 0.6% while the previous record was 0.3%.
  • French Prelim GDP q/q: This gives a preliminary estimate of the economic progress made in the country within the last quarter. The GDP measures the total value of imports and exports made in the previous quarter. Higher reading from this report will cause more uptrend for EURJPY. The forecast for this data is the same as its previous record of 0.5%.
  • German Unemployment Change: The unemployment rate is an essential economic data highly watched by investors. A higher unemployment rate discourages investors and could further cause the ECB to slow down in hiking the interest rate. The forecast for this data is 28K while the previous record was 48K.

B. Japanese zone

  • Industrial Production Prelim: This measures the changes in the inflation-adjusted value of output from manufacturers and other utility companies. The forecast for this data is -0.5% while the previous record was 9.2%. Higher reading from this data will strengthen the Japanese Yen.
  • Japanese Retail Sales y/y: This measures the changes in the total sales value made at the retail level. Higher readings from this report are good for the Japanese Yen. The forecast for this data is 1.9% while the previous record was 1.5%.
  • Consumer Confidence: This measures the level of trust consumers still have in the Japanese economy and is measured by consumer spending. Higher reading from this report is good for the Japanese Yen. The forecast for this data is 29.4 while the previous record was 30.2.
  • Housing Stats y/y: This measures the changes in the number of new residential buildings currently under construction. Higher reading from this report is good for the Japanese Yen. The forecast for this data is -3.4% while the previous record was -2.2%.

Forecast for EURJPY ahead of the CPI Flash Estimate report

EURJPY is currently pushing to break the resistance at ¥139.05. A break above this level could trigger more upside for this pair. The pair could rise to the next resistance level at ¥139.78.

On the contrary, should the bears dominate, we can expect more downside with the first support at ¥138.63. Failure to hold at this level could trigger a free fall with a target of ¥137.37.

In all, substantial volatility is expected from EURJPY today. Market traders should be cautious in making their trading decisions and apply appropriate risk management to sustain these positions.

Last Updated: 31/08/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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