The euro declined against the yen yesterday despite the release of a slightly better-than-anticipated German Ifo business climate index for November. Notably, Japan’s manufacturing PMI data missed economists’ estimates. The rising natural gas prices and the arrival of winter in Europe have turned the euro dollar weak against its peers including the yen. Overall, the EUR/USD pair declined from a high of 146.13 to a low of 143.65 in the past 24 hours.
The au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index (PMI), which reflects the overall health of the manufacturing industry, declined to 49.40 in November from 50.70 in the prior month and disappointed economists who were expecting an increase in the flash manufacturing PMI to 50.90. The reported figure reflects the first contraction in Japan’s manufacturing sector since January last year. The downturn was the strongest in two years, despite being marginal. A reading below 50 indicates contraction and vice versa.
In the meantime, business sentiment for the forthcoming 12 months stood at its weakest level in six months against the backdrop of ongoing worries about the prevailing worldwide economic scenario.
Also, Japan’s flash manufacturing output index fell to 46.30 in November from 48.70 in October. Likewise, the country’s flash services business activity index inched down to 50, from 53.20.
Overall, Japan’s flash composite output index declined to 48.90 in November from 51.80 in October.
The German Ifo business climate index rose to 86.30 in November from 84.50 in October, surpassing the reading of 85 anticipated by economists. The reported reading is the highest in three months.
The expectations index improved to 80 in November from 75.90 in the prior month. This indicates an increase in optimism among businesses. On the contrary, the current situation index declined to 93.10 from 94.20.
With respect to the sector-based business climate index, the manufacturing sector improved to -11.70 in November, from -15.40 in October. Future pessimism among businesses decreased significantly. Nevertheless, they rated their present circumstances as worse. The volume of fresh orders decreased once more.
The service sector recorded an increase to -5.40 from -8.5. Service providers were less gloomy about the upcoming months, yet more dissatisfied with the prevailing state of their businesses.
The trade sector rose to -26.90 from -31.90. Businesses saw the present situation as marginally improving. Their hopes were clearly elevated. Nonetheless, around half of businesses remain gloomy about the coming six months.
Also, the construction sector improved to -21.60 from -24, but remained completely pessimistic. Fresh orders declined once again.
The slight improvement in the German Ifo business climate index and poor Japanese manufacturing PMI data is expected to keep the EUR/JPY pair range-bound with a slight bullish bias in the days ahead.
The historical price chart indicates that the EUR/JPY pair is declining after facing resistance at 145.40. 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 currency pair to remain in a downtrend in the days ahead.
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.
