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  • Risk aversion weighed on the pair earlier in the day.
  • Euro capitalizes on upbeat GDP data from the euro area.
  • The pair is likely to stay calm tomorrow amid Labour day.

The EUR/JPY pair came under modest selling pressure and dipped below 124.50 after the disappointing data from China, which showed a softer than expected growth in the business activity both in the manufacturing and the service sector,  weighed on the risk sentiment and ramped up the demand for the safe-haven JPY. However, with the shared currency outperforming its major rivals in the second half of the day, the pair recovered its losses and was posting small daily gains near the 125 handle.  

The Eurostat announced that the real GDP in the first quarter (preliminary) expanded by 0.4% and 1.2% on a quarterly and yearly basis, respectively, with both data surpassing analysts’ estimates. Additionally, the unemployment rate in the eurozone ticked down to 7.7% in March from 7.8% in February to provide an additional boost to the shared currency. Later in the day, Germany’s Destatis reported that the annual inflation, as measured by the Consumer Price Index (CPI), rose 2% in April to beat the market expectation of 1.6%.

There won’t be any macroeconomic data releases from Japan or the euro area on Wednesday and the Labour Day holiday is likely to keep the trading action subdued at least until the FOMC publishes its monetary policy statement in the late NA session, which is unlikely to have a direct impact on the EUR/JPY pair.

Technical levels to watch for