The euro fell against the yen yesterday following the release of worse-than-anticipated industrial production data for October. The Eurodollar sell-off was also fueled by overwhelmingly optimistic core machinery orders data for October. Overall, the EUR/JPY pair declined from 144.25 to a low of 143.47 in the past 24 hours.
According to Japan’s Cabinet Office, core machinery orders rebounded with a growth of 5.40%m-o-m in October, following a contraction of 4.60% in the prior month and surpassing forecasts of a 2.60% increase. The increase was led by a rise in corporate capital spending against the backdrop of global economic uncertainty and higher import costs. The reported figure also reflects the first positive figure since July.
The overall value of machinery orders awarded to 280 manufacturers in Japan rose by 3.30% m-o-m in October.
Non-manufacturing orders jumped 14% in October. The increase was led by a 30.2% surge in agriculture, forestry, and fishing, a 24.50% rise in construction; and a 24.10% rise in information services.
In the meantime, manufacturing orders declined by 6.40%. The decrease was led by a 64.40% drop in orders of chemical & chemical products. Pulp, paper, and paper products posted a decline of 56.5%.
On a y-o-y basis, private-sector machinery orders grew by 0.40% in October, declining from a 2.90% rise in September.
The data published by the Bank of Japan indicated that the Tankan index, which reflected the sentiment of big manufacturers, declined to 7 in the December 2022 quarter from 8 in the September 2022 quarter and surpassed the reading of 6 anticipated by economists. The reported figure decreased for the fourth consecutive quarter and represents the lowest level since March 2021.
Large enterprises anticipate boosting capital expenditure by 19.20% in the current fiscal year ending March 2023, following a 2.30% dip in the prior year.
Core consumer prices increased 3.60% y-o-y in November, reflecting the quickest rate in four decades and surpassing the BoJ’s 2% objective for a seventh successive month.
Furthermore, the large non-manufacturers confidence index inched up to 19 in the December 2022 quarter from 14 in the September 2022 quarter and surpassed forecasts of 17. The reported reading reflects the highest level since December 2019.
The Eurozone’s industrial production contracted 2% m-o-m in October, following a 0.80% rise in the prior month and worse than forecasts of a 1.40% decline.
As per the data published by Eurostat, the decline was led by a 3.90% drop in energy and a 1.90% decline in durable consumer goods. Intermediate goods fell by 1.30% while capital goods decreased by 0.60%. On the contrary, the production of non-durable consumer goods rose by 0.30%.
On a y-o-y basis, the Eurozone’s industrial production expanded by 3.40% in October 2022.
The increase was led by a 10.50% surge in the production of non-durable consumer goods and a 9.20% rise in capital goods. However, durable consumer goods fell by 0.10%. Likewise, intermediate goods and energy declined by 2.90% and 8.70%, respectively.
The weak Eurozone industrial production data is expected to keep the EUR/JPY pair range-bound with a slight bearish bias in the short term.
The EUR/JPY pair is descending after failing to break the resistance at 144.05. The next major support is anticipated only near 142.20. Additionally, the currency pair is trading below its 50-day moving average while the stochastic indicator is in the bearish zone. Therefore, we anticipate the EUR/JPY pair to remain in a downtrend for the next few trading sessions.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
