EUR/JPY recovers to the 150.00 zone amid weak Japanese economic data

• EUR/JPY jumped above the zone and hit a daily high of 150.35.
• Japan’s Producer Price Index (PPI) came in at -0.70%m/m in May, below consensus.
• Orders for machine tools contracted 22.00% (yoy) in the same month.

The pair USD/JPY traded with a profit on Monday, after Japan’s PPI index fell to its lowest point since June 2021 and machine tool orders fell 22% year-on-year. In this sense, the moderate bets ahead of the meeting of the Bank of Japan (BOJ) on Friday and the increase in US bond yields are weakening the yen. On the Euro side, nothing relevant will be published on Monday, and the focus is on the inflation data for Tuesday and the decision of the European Central Bank (ECB) on Thursday.

Weak Japanese data fueled dovish bets on BOJ

Japan’s Producer Price Index (PPI) contracted 0.7%m/m in May, versus the 0.2% decline expected, and the annualized rate stands at 5.1%. Another report showed May machine tool orders fell 22%.

In this regard, weak economic data and slowing inflation have investors expecting a more dovish stance from Governor Ueda and his colleagues, implying a preference for accommodative monetary policies. That being said, according to the WIRP report, the odds of monetary policy being raised this week are less than 10%, but increase to 10% in July, 25% in September, 40% in October, and 55% in December.

For Tuesday’s session, investors will be watching the release of Germany’s May Harmonized Index of Consumer Prices (HICP) data, the headline figure of which is expected to confirm the preliminary reading of 6.3% yoy.

EUR/JPY levels to watch

From a technical point of view, the EUR/JPY suggests a neutral to bullish outlook in the short term. Despite bullish struggles for dominance, technical indicators remain supportive, implying further upside potential.

The next resistance for the EUR/JPY is seen at the 150.50 level, followed by the 151.00 zone and the multi-year high of 151.60. On the other hand, the key psychological level 150.00 remains the key support level for the EUR/JPY. If broken, the 20-day SMA at 149.60 and the 149.00 zone could come into play.

EUR/JPY daily chart