Revisiting EURJPY Technicals & Fundamentals

<p>EUR/USD required a convincing catalyst to lift it back above its important 200-DMA of 1.2820. And it did. China’s HSBC flash PMI hit a 13-month […]</p>

EUR/USD required a convincing catalyst to lift it back above its important 200-DMA of 1.2820. And it did.

China’s HSBC flash PMI hit a 13-month high at 50.4 reflecting improved credit growth and exports orders, allaying fears of a Chinese soft landing. Eurozone flash November services/manufacturing PMIs showed some signs of stability, thus enabling EUR pairs to move in tandem with rising equities.

Tomorrow’s release of Germany’s November IFO survey could magnify the recent bounce if the survey shows its first increase after seven consecutive monthly declines. We’ve seen post-Thanksgiving IFO releases to have a particularly significant impact in FX on a combination of thin trading activity and nearing the final big trades before trading desks wrap up for the year.

The fact that EUR/USD has broken well above its 200-DMA (previously a key resistance) and is now eyeing its 55-DMA may extend towards the next trendline resistance of 1.2960.

Updating our bullish call on EUR/JPY emerged in September calling for 107. EUR/JPY is now retesting its 100-DMA for the third time after two failures since the 2008 crash. Each of the prior two failures occurred in April of 2011 and April 2012– both periods involving a correction in global equities, and both stages were preceded by a rally largely involving ECB policy changes interventions. So what happens now? The Eurozone part of the equation remains unresolved—despite readiness by the ECB to pull the trigger upon a Spain request and a potential rally following the disbursement of funds to Greece. More importantly, the yen part of the equation rests on the implications for Bank of Japan policy change once the LDP takes the helm. The road to 110 yen appears more viable, as long as 104 support remains intact.


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