- EUR/JPY fell for the second day in a row and hit a two-week low on Wednesday.
- Dismal German PMIs are weighing on the common currency and putting pressure on the cross.
- The looming risk of recession and fears of intervention benefit the Yen and also contribute to the pair’s selling tone.
The EUR/JPY cross continues the previous day’s pullback from around 159.50, its highest level since September 2008, and remains under strong selling pressure for the second day in a row on Wednesday. The downward trajectory picks up during the early hours of the European session and drags the pair to two-week lows, around the 157.20 zone in the last hour.
The common currency weakens across the board after a preliminary report showed business activity in Germany contracted in August at the fastest pace in more than three years. In fact, the preliminary HCOB German Composite PMI missed estimates and fell to 44.7, hitting its lowest level since May 2020 and reigniting recession fears. In addition, business activity in the services sector contracted for the first time in eight months and the manufacturing PMI remained in contraction territory.
The data points to worsening economic conditions in the euro zone’s largest economy and fuels speculation that the European Central Bank (ECB) will halt its streak of nine consecutive rate hikes in September. Indeed, money market futures are now trading at a 40% chance that the ECB will raise rates by 25 basis points in September, compared with a 60% chance before the data was released. This, in turn, weighs on the Euro and puts downward pressure on the EUR/JPY pair.
Elsewhere, the Japanese Yen (JPY) attracts some safe-haven flows on rising concerns about a deeper global economic downturn. Apart from this, intervention fears are underpinning the Yen and contributing to the selling tone surrounding the EUR/JPY cross. That said, the dovish stance taken by the Bank of Japan (BoJ) could halt any significant advance in the Yen and warrants some caution before confirming that the cross has topped out in the short term.
EUR/JPY technical levels to watch
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
