The EUR/JPY cross quickly erased last week's gains and dropped below some basic technical levels as it can't sustain any momentum and struggles to find a direction.
The Bank of Japan Governor Haruhiko Kuroda spoke again on Thursday, saying that the country's consumer inflation is expected to turn positive.
He also reiterated that the central bank wouldn't hesitate to ease policy further if necessary (is it even possible?). Furthermore, he thinks that Japan's economy is expected to recover as the coronavirus pandemic's impact gradually subsides. According to Kuroda, Japan's financial system remains stable, and financial conditions are accommodative overall.
Japanese macro data came out disappointing today, with the leading indicator index dropping to 101.8 in August, down from 104.1 previously, while the coincident index also weakened, from 94.4 to 91.5.
European data & speeches
The European calendar brought German industrial production today. The monthly change crashed massively to -4%, down from 1.3% previously . The year-on-year gauge dropped from 6% to 1.7%, against expectations of an improvement to 11.4%. Nevertheless, the euro remained higher after these weak numbers.
From other news, the European Central Bank (ECB) Governing Council member and Bank of France Head Francois Villeroy de Galhau said that he believes inflation will come back down below 2% within a year. That was a somewhat optimistic view, considering the inflation pressures are not easing but still building up.
Later in the day, the ECB monetary policy account minutes will be released. It's a detailed record of the ECB Governing Board's most recent meeting, providing in-depth insights into the economic conditions that influenced their decision on where to set interest rates.
Additionally, the ECB's Elderson, Lane, and Schnabel are scheduled to speak today, possibly influencing the euro, although their speeches rarely cause major market movements.
Short and medium-term chop
The cross failed to stay above the psychological 130 threshold, and it also declined back below its 50-day moving average. The medium-term trend remains neutral as the euro has not moved anywhere since July. The short-term outlook also seems relatively neutral as rallies are sold quickly, but dips are being bought. Thus, no new lows or highs are being made. As a result, choppy trading is expected to continue.
The resistance could be found near 129.50 (at the 50-day moving average), followed by the last week's highs at 130.50. The EUR/JPY cross needs to jump above 130.70 to change the short-term trend to bullish.
Alternatively, the support is seen at 128.50, with the critical demand zone at 128.00. If the euro drops below 128, the medium and short-term outlooks will most likely change to bearish.