EUR/JPY loses ground despite good inflation numbers from Germany and Spain

• The EUR/JPY pair posted its second consecutive day of losses and fell as low as 157.40.
• The German CPI rose to 6.4% vs. 6.3% expected and the Spanish CPI to 1.9% vs. 1.7% forecast.
• Japanese retail sales rose more than expected in May.

The EUR/JPY pair extended its losses for the second day in a row, falling towards 157.40. Good retail sales data in Japan helped the Japanese yen gain ground. Despite the good inflation figures published in Germany, with CPI rising to 6.4% (versus 6.3% expected), and in Spain, with CPI reaching 1.9% (versus 1.7% expected), the EUR/JPY remained under pressure, but rising German yields limited the Euro’s downside potential.

Japan reported strong data, all eyes on Friday’s inflation numbers

Retail sales in Japan returned positive results in May, rising 1.3% versus 0.8% expected. This positive momentum follows a revised 1.1% figure in April, previously reported as a -1.2% decline. On a year-over-year basis, retail sales rose 5.7%, beating expectations of 5.2% and reflecting an upward revision from April’s revised 5.1%.

It should be noted that Kazuo Ueda, Governor of the Bank of Japan, maintained a cautious stance during his speech at the European Central Bank’s Sintra Forum on Wednesday, noting that core inflation remains below the BoJ’s target. He further expressed his intention to assess policy adjustments only when inflationary pressures align with the central bank’s forecasts. As strong economic data may contribute to rising inflationary pressures, investors will closely monitor the Tokyo Consumer Price Index (CPI) for June and the unemployment rate for May, both released on Friday.

On the Euro side, German bond yields rose after inflation figures from Germany and Spain. 2-year and 5-year yields rose 2.48% and 4.75% to 3.26% and 2.60%, limiting losses for the European currency.

EUR/JPY levels to watch

According to the daily chart analysis, the EUR/JPY pair maintains a positive outlook, although the bullish momentum has temporarily stopped. Despite two consecutive days of losses, the RSI has been in the overbought zone since mid-June, so there may still be more room for bearish moves.

On the downside, support levels line up at 157.00, 156.50 and 156.00. Conversely, if the bulls regain momentum, resistance levels lie at 158.00, 158.50 and 159.00.

EUR/JPY Daily Chart