The single currency was quickly erasing yesterday’s losses and the EURJPY cross was trading 0.60% stronger on Wednesday, hovering around 126.30 in the morning.
Earlier in the day, German retail sales surprised on the upside rising 1.2% m/m while increasing 2.3% y/y in April in real terms ahead of German inflation and unemployment data due later on Wednesday. Traders will also focus on Thursday’s euro zone CPI data and inflation is expected to accelerate from 1.2% to 1.6%, which could be a bullish signal for the single currency.
Later in the day, the US ADP employment report is due and should show 190,000 new jobs in May, down from 204,000 in April. Furthermore, the first revision of the US GDP for the first quarter will be released, along with the GDP price index.
Tuesday’s Italian problems seem to be gone, judging form the current market reaction. The resistance for the EURJPY cross is at 127.00 and afterward at 127.50. As long as the cross trades below, the outlook remains bearish. The euro is oversold and therefore some short squeeze rallies could occur. The support is at 126 and if not held, the price might revisit yesterday’s lows around 124.60. In all cases we strongly recommend to have rigorous money and risk management.
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