Fundamental Analysis of EUR/JPY for December 12, 2018

EUR/JPY has been volatile and corrective in the price range of 127.50 to 130.00 from where it is expected to push lower in the coming days. Despite a series of worse economic reports published recently in Japan, JPY has made impulsive bearish price swings that indicates EUR's weakness.

EUR has been hurt by Italy's budget deficit issue for a few weeks in a row. Italy has not suggested a better solution on the draft budget. As a result, EUR bulls lost faith in further EUR growth. Moreover, BREXIT deal is also derailing EUR's advance. Recently, ECB President Draghi has been quite positive in his speeches about the eurozone's economic outlook. Besides, some upbeat economic reports contributed to overall gains of EUR. Today Italian Quarterly Unemployment Rate report was published with a positive result of a decrease to 10.2% from the previous value of 10.7% which was expected to be at 10.3% and the eurozone's Industrial Production increased to 0.2% as expected from the previous value of 0.6%.

On the other hand, due to recent Financial Sector issues and worse economic results, JPY has been undermined by the recently published economic reports. If more downbeat reports from Japan follow, JPY will lose ground. Today Japan's Core Machinery Orders report was published with an increase to 7.6% from the previous negative value of -18.3% which unfortunately failed to meet the expected score of 10.2%, PPI decreased to 2.3% from the previous value of 3.0% which was expected to be at 2.4%, and Tertiary Industry Activity increased to 1.9% from the previous value of -1.2% which was expected to be at 0.9%. Ahead of Tenkan and Revised Industrial Production report this week, JPY is currently quite short of positive economic results to dominate EUR.

Meantime, EUR is currently quite optimistic with the economic reports despite the recent political developments. On the other hand, JPY has been hurt by the economic data. If Japan fails to publish solid reports, EUR is expected to continue a further rally. Nevertheless, any positive news from Japan may lead to continuation of the bearish pressure in the pair again with ease.

Now let us look at the technical view. The price has been quite volatile but impulsive with the recent bullish momentum which lead it to reside above the Kumo Cloud resistance with an impulsive break. The price is currently residing above 128.50 area from where it is expected to push higher towards 130.00 resistance area in the coming days. As the price remains above 128.00 area with a daily close, the bullish pressure is expected to continue. Otherwise, a break below 128.00 may lead the price lower towards 125.50 support area in the distant future as the overall bias of this pair is still bearish.

SUPPORT: 125.50, 127.00-50, 128.50

RESISTANCE: 129.50, 130.00

BIAS: BEARISH

MOMENTUM: VOLATILE