EUR/JPY has been struggling at the edge of 125.00 area for a few weeks in a row. The pair could extend a downward bias in the long term. Ahead of ECB President Draghi's speech today, JPY had been quite soft in light of the minutes today. Investor sentiment will clear up after the close today.
EUR managed to sustain the momentum over JPY after the drastic fall towards 119.00 area was recovered earlier. The ECB forecast of the eurozone's economic growth has been downgraded in the speech of ECB President Draghi last week. He warns that the euro area is losing momentum. According to ECB's quarterly survey, a key element of Thursday's policy update sees 2019 GDP growth to decrease to 1.5% which was expected to be at 1.8%. The Inflation is also dipping to 1.5% instead of 1.7% in the previous forecast. The ECB has been missing the inflation target since 2013 that undermines the eurozone's economic growth in the long run. If ECB President Draghi drops any positive hints for market participants, EUR could find some support. Otherwise, EUR is expected to lose further momentum, thus opening way for JPY gains.
On the JPY side, the Bank of Japan released the minutes of the latest policy meeting where policymakers disagreed over the level of bond yields. The US-China Trade War has already affected JPY. A positive outcome of the Trade War is expected to help Japan to regain the growth. Otherwise, the trade conflict could bring a fallout to Japan's economy. Members present at the meeting stated some factors to look at, including reaching the 2% inflation target strain on Japan's economy amid a slowdown in the global economy. Moreover, SPPI report was published with a decrease to 1.1% which was expected to be unchanged at 1.2%. Though Japan's economy has been growing quite rapidly, the current situation is acting as a barrier to further growth. On Wednesday, JPY Retail Sales report is going to be published which is expected to decrease to 0.9% from the previous value of 1.9% and Consumer Confidence Index is also expected to edge down to 42.5 from the previous figure of 42.7.
Meanwhile, both currencies in the pair are still quite indecisive, whereas any positive outcome of economic reports or events may clear up a direction in the pair. Though EUR has been struggling to gain momentum, any downbeat economic data from Japan may lead to further downward pressure in the pair.
Now let us look at the technical view. The price is currently moving lower with confluence below 125.00 area. The pair is expected to have a higher probability to decline deeper towards 123.00 and later towards 120.00 area in the future. As the price remains below 125.00 area with a daily close, the bearish bias is expected to continue or else a bullish counter-move with sustainable bullish momentum may occur.
SUPPORT: 120.00, 123.00
RESISTANCE: 125.00, 127.50
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