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EUR Bolstered Ahead Of Eurozone Inflation Prints, JPY Extends Downtrend

FOREX
  • The Euro continued its grind higher from late on Friday as the single currency was buoyed by some moderate hawkish ECB rate re-pricing and reports of potentially supportive month-end flows. This prompted EURJPY to approach the 158 handle, advancing 0.85% on the day.
  • Despite the pair oscillating either side of 150 in late May and early June, the sharp rally across the last eleven trading sessions equates to around a +5.2% surge, as it eats into the sharp decline witnessed in 2008.
  • EURJPYprice action reinforces the current technical bullish theme after recently clearing key resistance at 151.61, the May 2 high and an important bull trigger. Moving average studies are in a bull mode position too, highlighting positive market sentiment and the topside focus is on 158.72, a Fibonacci projection.
  • Elsewhere, a slew of positive data surprises was unable to spark a broad US dollar revival, with the USD index sitting 0.20% lower on the session as we approach the APAC crossover.
  • However, USDJPY did surge from the lows, breaking above 144.00 in the process, as the upward pressure on front-end yields further hampered the struggling yen.
  • The run higher in USD/CNH stopped just in front 7.2500 during Asia-Pac hours, with a slightly more forceful PBoC lean against further weakness (albeit not large by historic terms) and Reuters reports suggesting that “state banks sold dollars against the yuan” providing the most meaningful signs yet that authorities have started to get a little uncomfortable with at least the speed of the recent run lower in the value of the yuan. Spot deals around 7.2250 as of writing.
  • On Wednesday, CPI data for Australia and Italy will receive attention. Likely the market focus will be on the ECB Forum in Sintra, where Fed’s Powell, ECB’s Lagarde, BOJ’s Ueda and BoE’s Bailey all have a joint event.
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