The EUR/JPY cross continued to enjoy the benefits of the positive sentiment in the markets and traded 0.35% higher during the London session, rising toward the important 130 level.
Japanese macroeconomic news undermines the JPY
Earlier today, Japanese large retail sales improved slightly to 1.4% for October, up from 0.9% previously. At the same time, retail trade rose to 1.9% year-on-year, more than double the 0.9% scored in September. As a result, the monthly change also ticked higher.
In addition to the Japanese data, the Bank of Japan’s latest Summary of Opinions was also released but failed to cause any significant movements in the JPY pairs.
Bank of Japan policymakers discussed recent rising inflationary pressures that could force them to alter their view the country remained vulnerable to the risk of deflation.
Furthermore, In the following quarterly report due in January, it's necessary to examine whether the current assessment - that risks to prices are skewed to the downside - remains appropriate. The JPY slid lower after the report.
Later today, the US Dallas Fed Manufacturing Business Index for December is due and is expected to improve slightly to 13.2 from 11.8 previously. However, since liquidity is thin in the markets, volatility will likely be minimal throughout the day.
It looks like sentiment remains bullish in the markets, judging from the US equities, which continue to advance today.
The short-term chart seems bullish
If the EUR/JPY cross jumps above 130, there is a critical resistance zone between 130.40 - 130.70, where previous lows, highs, and the 200-day moving average are all converged. Rising beyond that level would likely change the medium-term trend to bullish, targeting 132.00.
Alternatively, the short-term support could be located at 129.50, and if not held, the euro could decline below 129.00. The long-term major demand zone remains in the vicinity of 127.50.