Forex Market: EUR/JPY trading forecast for Monday

Friday’s trade saw EUR/JPY within the range of 133.44-134.27. The daily low has also been the lowest level since February 5th, when a low of 132.49 was recorded. The pair closed at 133.91, gaining 0.13% on a daily basis. The cross fell 1.14% for the whole week, which marked the first loss in the past five weeks. On Monday (March 2nd) EUR/JPY may be influenced by a number of fundamentals, as listed below.

Fundamentals

Euro area

Manufacturing PMI data

Spanish Manufacturing Purchasing Managers Index (PMI) probably remained almost unchanged in February, coming in at a reading of 54.6 from 54.7 in January. If so, this would be the 16th consecutive month, during which the PMI remains in the zone above 50.0, indicating optimism (increasing activity). The official reading is to be published at 8:15 GMT on Monday.

Activity in Italys sector of manufacturing was probably lower in February, with the corresponding PMI dipping to 49.6, as expected by experts. In January the PMI stood at 49.9. Markit Economics is expected to release the official data at 8:45 GMT.

Frances final manufacturing PMI probably remained in the zone of contraction for a tenth straight month in February, while confirming the preliminary PMI reading of 47.7, which was reported on February 20th. The official PMI is due out at 8:50 GMT.

The final reading of German manufacturing PMI probably confirmed the preliminary value for February, with the index coming in at 50.9. If so, this would be the third consecutive month of expansion in activity. In January the final PMI also stood at 50.9, down from a preliminary value of 51.0. Markit will release the official reading at 8:55 GMT.

The final manufacturing PMI in the Euro zone probably also confirmed the preliminary value in February, with the index remaining at 51.1. If so, this would be the highest PMI level since July 2014, when the gauge was reported at a final 51.8. It would also be the 20th consecutive month, during which the PMI inhabited the area above 50.0. In January the final PMI was registered at 51.0, in line with the preliminary reading. The PMI reflects the performance of the manufacturing sector in the Euro area and is based on a survey of 3 000 manufacturing companies. National data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These member states together account for almost 90% of Euro zones manufacturing activity. The Manufacturing Purchasing Managers Index is comprised by five individual indexes with the following weights: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stock of Items Purchased (10%), as the Delivery Times index is inverted, so that it moves in a comparable direction.

In case the final PMI readings exceeded expectations, the common currency would receive a boost. The official manufacturing data for the Euro region as a whole is scheduled to be released at 9:00 GMT.

Consumer Inflation – preliminary estimate

The preliminary annualized consumer inflation in the Euro zone, evaluated in accordance with Eurostat’s harmonized methodology, probably accelerated to -0.5% in February, according to the median estimate by experts, from a final rate of -0.6% in January. The latter has been the lowest inflation rate since July 2009, when a rate of -0.6% was reported. The largest downward pressures to impact the regions annual inflation in January were recorded for fuels for transport (-0.77%), heating oil (-0.24%) and telecommunications (-0.05%). At the same time, the largest upward pressure came from restaurants & cafés and rents (+0.14% each) and prices of tobacco (+0.07%), according to the report by Eurostat.

The index shows the change in price levels of a basket of goods and services from consumer’s perspective and also reflects purchasing trends. The main components of the HICP are food, alcohol and tobacco (accounting for 19% of the total weight), energy (11%), non-energy industrial goods (29%) and services (41%).

The Harmonized Index of Consumer Prices (HICP) is used to evaluate and compare inflation rates between Member States, according to Art. 121 of the Amsterdam’s Agreement and directives by the European Central Bank (ECB), in order the latter to achieve price stability and the implementation of monetary policy. The HICP aggregates are calculated as a weighted average of each member state’s HICP components.

In case the HICP slowed down more than anticipated, thus, further distancing from the 2% inflation objective set by the ECB, this would mount selling pressure on the euro, as this suggests a need for stimulus in order to spur economic activity.

The preliminary annualized Core HICP for February probably increased at a rate of 0.6%, matching the final rate, reported in January. It has been the lowest annual core inflation ever recorded. This index excludes volatile categories such as food, energy, alcohol and tobacco. Eurostat is scheduled to release the preliminary inflation data at 10:00 GMT on Monday.

Unemployment

At the same hour, Eurostat will announce the rate of unemployment in the Euro region for January. It probably remained steady at 11.4%, or the lowest rate since July 2012, when unemployment was registered at 11.4%. In December the lowest unemployment rates were recorded in Germany (4.8%) and Austria (4.9%), while the highest rates were in Greece (25.8%) and Spain (23.7%).

The EU 28 unemployment rate was reported at 9.9% in December, down from 10.0% in comparison with November and from 10.6%, registered in December 2013. According to data by Eurostat, 24.056 million people in the EU28, of whom 18.129 million were in the Euro area, were unemployed in December. Compared with November the number of people unemployed decreased by 228 000 in the European Union and by 157 000 in the Euro zone. Compared with December 2013 unemployment was lower in the EU28 (a decrease by 1.710 million), while unemployed people in the Euro area were 693 000 fewer.

Unemployed are considered to be all persons aged between 15 and 74, who have not been hired during the survey period, have been actively seeking employment during the past four weeks and are able to accept any job proposition right away or in two weeks time. A drop in unemployment in the region would support the single currency.

Pivot Points

According to Binary Tribune’s daily analysis, the central pivot point for the pair is at 133.87. In case EUR/JPY manages to breach the first resistance level at 134.31, it will probably continue up to test 134.70. In case the second key resistance is broken, the pair will probably attempt to advance to 135.14.

If EUR/JPY manages to breach the first key support at 133.48, it will probably continue to slide and test 133.04. With this second key support broken, the movement to the downside will probably continue to 132.65.

The mid-Pivot levels for Monday are as follows: M1 – 132.85, M2 – 133.26, M3 – 133.68, M4 – 134.09, M5 – 134.51, M6 – 134.92.

In weekly terms, the central pivot point is at 134.36. The three key resistance levels are as follows: R1 – 135.29, R2 – 136.66, R3 – 137.59. The three key support levels are: S1 – 132.99, S2 – 132.06, S3 – 130.69.