EUR/JPY Fundamental Forecast – August 11 2016

The EUR/JPY drifted lower on Wednesday, closing at 113.006, down 0.264 or -0.23%. The trading range remained tight for a sixth day due to the lack of major economic news out of Japan and the Euro Zone.

There was one piece of news from Japan. The Tertiary Industry Activity Index, released before the opening, was up a 0.8%. This report was encouraging since it soundly beat expectations for a 0.3% rise. It was also a full reversal from the previous minus 0.7% reading.

Volume and volatility were light on Wednesday, one day ahead of a Japanese public holiday. The markets are closed on Thursday so volume is expected to remain below average. Some major players are expected to also be absent on Friday, creating an extended week-end.

Despite the formation of a short-term support base, the EUR/JPY is expected to continue to weaken because of trader disappointment from the Japanese government and Bank of Japan stimulus programs. Furthermore, the market is not expected to hear from the European Central Bank until September 8.

Just watching the slew of weak economic data out of Britain makes one believe that it’s just a matter of time before the weakness spreads to the Euro Zone as the Brexit-effect continues to take its toll on the two economies.

Although we may see a few periodic short-covering rallies, the overall trend is down. This trend should continue over the near-term with the post-Brexit low at 109.519 a reasonable target. Furthermore, we expect to see selling pressure increase later in the year, once the U.K. files Article 50 and formerly asks to end its membership in the European Union.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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Thursday, August 11, 2016

Government Bond Auctions

Date/Time Country Type

Aug 10 11:00 Germany EUR 5B 0% 2026 Bund

Aug 10 19:00 US 10-yr Note auction

Aug 11 11:30 UK 0.125% I/L 2036

Aug 11 19:00 US 30-yr Bond auction