Key Moments
- EUR/JPY traded around 184.50 after confirming a break above the 50% retracement of the late-July downswing, with bulls watching resistance near 185.00.
- Japan’s Q2 GDP increased 0.3% versus 0.5% in Q1 and below market expectations for unchanged 0.5% growth, with year-on-year expansion slowing to 1.1%.
- Technical signals, including a rising trendline, an RSI near 52, and a strengthening MACD, pointed to rebuilding bullish momentum in EUR/JPY.
Euro Gains as Weak Japanese Data Pressures Yen
The Euro (EUR) continued to edge higher against the Japanese Yen (JPY) for a third straight session on Monday, supported by renewed Yen weakness following softer-than-expected Japanese Gross Domestic Product (GDP) numbers. The EUR/JPY cross traded in the 184.50 area at the time of writing, having decisively broken above the 50% retracement of the late-July decline, and bringing the next key resistance band around 185.00 into focus.
Earlier on Monday, Japan’s Cabinet Office reported that the economy expanded by 0.3% in the second quarter, easing from 0.5% growth in the first three months of the year and falling short of expectations for an unchanged 0.5% pace. On an annual basis, growth slowed to 1.1% from 1.8% in the prior quarter, compared with market forecasts for a 2.0% increase.
Economists at Brown Brothers Harriman (BBH) observed that the latest data point to a weaker growth backdrop than markets had anticipated. BBH emphasized that “private consumption was flat, while private non-residential investment shaved -0.2ppt off growth.” The firm added that “The sluggish domestic demand activity will do little to ease Japan’s fiscal concerns, a major headwind for JPY.” said the BBH experts in a note.
Technical Picture: Uptrend Intact as Bulls Target 185.00
EUR/JPY traded at 184.54, with spot prices maintaining a clear stance above an ascending trendline drawn from the late-July lows. Momentum gauges signaled an improving bullish backdrop. On the daily chart, the Relative Strength Index (RSI) hovered around 52, indicating neutral-to-positive momentum, while the Moving Average Convergence Divergence (MACD) had turned more firmly positive, suggesting that buying pressure has been rebuilding after last week’s consolidation phase.
On the topside, buyers are expected to encounter a significant resistance zone between the 61.8% Fibonacci retracement of the July downswing at 184.82 and the July 31 peak at 185.17. A sustained break above this area would open the way toward the next upside objective near 186.00, which aligns with the lows from July 27 and 28 and the 78.2% Fibonacci retracement of the same move.
On the downside, initial support emerges at a cluster formed by the 200-day Simple Moving Average (SMA) and the 50% retracement of the previously mentioned July decline, just below the 184.00 handle. A decisive move beneath this confluence would shift attention toward Fibonacci support near 183.15, a level that contained selling pressure on August 12.
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