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Forex: EUR/JPY plunges almost 100 pips after German GDP

Having gone as high as 125.95 ahead of the German preliminary GDP Q4, the EUR/JPY dived below the opening price of 125.66 in reaction to quarterly recession in both Germany and France. The cross is being held around 125.15, with a low printed at 125.02.

In Germany, economic growth might have eased from 0.4% to 0.1% (YoY), below 0.2% consensus, with a quarterly recession of -0.6% (consensus of -0.5%). The quarterly recession in France was of -0.3%. French Nonfarm Payrolls contracted -0.2% in Q4 (flash), as expected.

On the Yen side, according to UBS analysts, more volatile than the BoJ decision were remarks by Kazumasa Iwata, one of the candidates for BoJ Governor: "He reportedly said that a yen correction is needed to reach the 2% inflation target, and that USDJPY in the range of 90-100 is just a return to equilibrium", wrote analysts Geoffrey Yu and Gareth Berry.

"We have a minor level at 124.75 and while above here the market will remain capable of retesting the 127.71/93 resistance, where we again look for failure", wrote Commerzbank analyst Karen Jones, pointing to support below at 122.50 and then at 120.03. "We look for these to hold the downside and provoke recovery", she added.

Forex Flash: Inflation targets hold different fortune for JPY, GBP – UBS

The BoJ kept all monetary policy settings unchanged overnight – there were no changes to asset purchase targets and no interest rate adjustments either. The USD/JPY dropped 10 pips afterwards but quickly recovered. Remarks by Kazumasa Iwata, one of the candidates for BoJ Governor, were more market moving however. He reportedly said that a yen correction is needed to reach the 2% inflation target, and that the USD/JPY in the range of 90-100 is just a return to equilibrium.
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Forex Flash: AUD/USD remains directly offered, targeting 1.0149 - Commerzbank

Having reached cloud resistance on the 240 minute chart at 1.0365, the AUD/USD is expected to fail here and sell off to the 1.0237 23rd October 2012 low. "It continues to hold below the accelerated downtrend at 1.0368 and as a consequence should remain directly offered", wrote analyst Karen Jones, targeting short term the 1.0149 October 2012 low. "Our longer term target is .9783, the 2011-2012 support line and then 0.9404 the 2009 peak", added the Commerzbank analyst.
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