Heavy Demand in EURJPY Affects EURUSD

Heavy Demand in EURJPY Affects EURUSD

The risk sentiment added to its positive momentum overnight. The Asian markets mostly closed the day in the green area. Hang Seng index advanced by 0.38%, Kospi added 0.2573%, Taiwan's Taiex was up by 0.1863%, while Shanghai's composite index lost 0.62%. The MSCI Asia Pacific index (excluding Japan) gained 0.1763% since the beginning of the week, while Nikkei continued to climb for the third consecutive day, and closed at 10,322.98 (beating the previous year-high of 10,255.15 as of March 27th).

The relative strength index is pointing the overbought area since Dec. 12th (as for JPY vs. USD mentioned in our previous reading), however the markets are trading over the expectations for growth, as promised by Abe. Japan will release the yearly consumer price index tomorrow. According to the Bloomberg survey, the yearly CPI is expected to decrease by -0.2%, versus the prior -0.4%, the yearly CPI excluding food is forecasted to lose 0.1% (vs. the prior 0%) and the CPI excluding food and energy is expected to remain at -0.5%.

The markets speculate on Abe's reaction to the decline in inflation figures, and expect him to push the central bank to boost the cash injections. Yen keeps adding to its negative momentum against all of his major peers. USDJPY broke the 85.75 resistance early in the morning, before consolidating back to 85.60 levels. GBPJPY is trading around 138.36 year-highs, while EURJPY hit 113.69. The heavy EURJPY demand affects the EURUSD. Euro broke our first resistance at 1.3241 (vs. USD), and is currently testing the 1.3270 levels. Our next resistances are at 1.3284, 1.3386 (March high), then 1.3487 (year-high). On the downside, we will watch 1.3241 (broken resistance), 1.3219/20 (yesterday's support), and 1.3200 (psychological resistance).

Today, the focus will be on the US initial jobless claims forecasted at 360 versus the prior 361K, continuing claims expected at 3200K versus the previous 3125K, consumer confidence anticipated to decrease to 70 from the prior 73.70, and the monthly new home sales expected to increase to 3.3% from last month's -0.3%.