The euro gained ground against the yen yesterday following the release of solid Eurozone inflation and trade balance data. The euro’s uptrend was also fueled by worse-than-anticipated Japan’s core machinery orders for January. Overall, the EUR/JPY pair rallied from a low of 162.27 to a high of 162.68 in the past 24 hours.
According to Japan’s Cabinet Office, the country’s core machinery orders fell by 1.70% m-o-m in January, following a 2.70% rise in the previous month and worse than forecasts of a 1% decline forecast by economists surveyed by Reuters. The data underscored worries about the country’s sluggish economic recovery.
Notably, core orders are a highly volatile data series considered a leading indicator of capital spending in the upcoming six to nine months.
On a y-o-y basis, core orders, which do not include volatile readings from the electric and shipping sectors, fell by 10.90% in January 2024, surpassing forecasts of an 11.20% slump.
The cumulative value of Japan’s machinery orders fell by 2.90% m-o-m in January.
Japan also downwardly revised its assessment of machinery orders, shifting from characterizing the situation as “stalling” to now acknowledging “some weakness.”
The Eurozone trade surplus decreased to €11.4 billion in January from €16.8 billion in December. In January 2023, as per Eurostat, the trade balance was a deficit of €32.6 billion.
Exports grew by 1.3% y-o-y to €225.9 billion. The increase was led by a 3.30% growth in the shipments of miscellaneous manufactured articles. Exports of manufactured goods rose by 1.20%. Chemical products posted a growth of 3% y-o-y in January. Machinery and transport equipment reported an increase of 1.5% in the same period.
Imports fell by 16.10% y-o-y to €214.5 billion. The decline was led by a 36.40% dip in imports of mineral fuels and lubricants. Manufactured articles posted a decline of 13%. Manufactured goods and chemical imports decrease by 12.60% and 10.40%, respectively.
In a separate news release, Eurostat stated that the Eurozone annual inflation was 2.60% y-o-y in February, a decrease from 2.80% from the previous month. The initial estimates pegged the Eurozone annual inflation rate at 2.60%. Economists did not anticipate any change in the preliminary estimates. On a y-o-y basis, the Eurozone annual inflation rate was 8.50% in February.
The increase in the consumer price index was led by a 1.73% increase in services. Food, alcohol, and tobacco grew by 0.79%. Also, non-energy industrial goods posted an increase of 0.42%. However, energy inched down by 0.36% in the same period.
The solid Eurozone economic data is expected to keep the EUR/JPY pair slightly bullish in the near term.
Technically, the EUR/JPY pair is ascending after testing the support at 161.05. The next resistance is anticipated to be only near 163.50. Additionally, the currency pair is trading above its 50-day moving average, while the stochastic oscillator is in the bullish zone. Therefore, we anticipate the EUR/JPY pair to remain in an uptrend in the near term.
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.
