With EUR/JPY abandoning the 120.00psychological resistance, the bearish trend will remain the strongest. The recent losses reached the 117.44 support level before settling around 117.80 at the time of writing, and before the announcement of inflation figures from the Eurozone. Prior to that, monthly Tankan survey the by the Bank of Japan, which is concerned with the country's industrial and non-industrial sector. Contributing to the pair's recent losses is the continued gloomy outlook for the future of the German-led Eurozone economy. Despite recent risk appetite, the bearish trend remains the strongest for the pair performance.
Japan is set to raise sales tax from today, and consumers appear to have stepped up their purchases before the increase. Retail sales for August jumped 4.8%, double the median forecast in the Bloomberg survey. Preliminary data from the Ministry of Economy, Trade and Industry showed that Japanese industrial production fell faster than expected in August. Industrial production fell -1.2 percent month-on-month in August. Economists had expected a 0.5 percent decline.
In contrast, preliminary data from Eurostat showed that the Eurozone unemployment rate fell unexpectedly in August to its lowest level in more than a decade. The unemployment rate fell to 7.4 percent from 7.5 percent in July. Economists had expected the rate to remain unchanged.
Investors are looking forward to the next round of US-China talks scheduled for October. The high-level talks will begin in Washington, a sign of easing tensions between Washington and Beijing. Chinese Vice Premier, Liu He, will meet with a US delegation, represented by Trade Representative Robert Lightzer and Treasury Secretary Stephen Mnuchin.
According to the technical analysis of the pair: The general trend of EUR/JPY will remain bearish as long as it is away from the 120.00 psychological resistance level, and as long as the slowdown in the Eurozone economy stands. We do not expect a near improvement in the performance as investors see little improvement in the economic indicators for the Eurozone, even after the ECB cut interest rates and asset purchases again. Abandonment of the Euro could support the pair falling to the support levels of 117.20, 116.50 and 115.80 respectively.
On the economic data front: From Japan, the focus will be on the release of the Tankan Industrial Survey from the Bank of Japan. From the Eurozone, the inflation numbers will be announced.
