Eurjpy Bullish On Weak Japan Pmi

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Eurjpy Bullish On Weak Japan Pmi

Eur/Jpy Crosses 173.50 On Weak Japans Pmi

The EUR/JPY cross continues to set new records and is seen trading near 173.80. This marks the 6th day in a row that this cross has remained positive but it has more to do with JPY's weakness rather than EUR strength.

The Japanese yen (JPY) once again weakened after the recent PMI data showed a contraction in Japanese business activity. The contraction took place during June and has sent the JPY further lower against the EUR and USD.

Japan'S Services Pmi Declines In June

In May, the PMI services in Japan was 49.8, which has now gone down to 49.4 in June, a change of -0.4. If we look back, a contraction of such scale was only last seen during January 2022. So, it makes sense for the JPY to turn weaker after the recent PMI print.

While the JPY continues to reach new lows against other G10 currencies, there is a growing concern among traders. In the past, the Bank of Japan has always stepped into the FX market to increase the value of JPY against other currencies.

Now that the JPY is lurking at record lows, the chances of an intervention from the BoJ have increased once again. If that happens, the JPY will gain some ground in the short term.

However, FX intervention from the BoJ is not expected to provide a long-term solution to the problem of weaker JPY. The BoJ will have to make a fundamental change to its monetary policies if it really wants a stronger JPY against the EUR and USD.

In the EU, the HICP for June has shown a reading of 2.5% against the May's reading of 2.6%. This can be used as a solid evidence by the European central bank (ECB) to cut the rates once again in 2024.

One of the biggest catalyst for a stronger EUR/JPY is the policy divergence between the BoJ and the ECB. So as long as that remains in place, the EUR/JPY will continue its bullish descent.

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