Forex: EUR/JPY steadily rising ahead of ESM bill auction

Share | (Barcelona) - The EUR/JPY has been the main market mover over Japan's Finance Minister Aso comments regarding the usage of foreign exchange reserves to buy ESM bonds in order to help stabilize the Yen. As there will be a ESM bill auction later today, it's quite possible the EUR/JPY reacts to the results.

Lutz Karpowitz, Commerzbank analysts, explains how the FX market can be misled by this kind of remarks and measures: "Clearly the markets were taken in by this announcement as there is no actual reason for JPY weakness if Tokyo uses its FX reserves to purchase ESM bonds. Obviously the FX reserves are being held in foreign currency anyway. So no sale of JPY is involved". "We too assume that the latest depreciation is not enough for Tokyo, while today's announcement on the ESM bond purchases is unlikely to have a sustainable effect", Karpowitz added.

Throughout the European morning, Germany revealed very soft exports (-3.4%) and imports (-3.3%) and a narrowed trade surplus from €15.1B to €14.5 in November. Factory Orders also fell, -1.8% (MoM). The Eurozone has found improving leading indicators in December, an upwards revision in the annualized retail sales figure of October (from -3.6% to -3.2%) and a rising unemployment rate to 11.8% in November, as expected.

"EUR/JPY's overextended rise has broken its steep rising trendline but the low of its rising channel has thus far held", wrote MIG Bank analyst Bijoy Kar, pointing to a short-term key support at 113.20 (31/12/2012 low) and the need of a break above the resistance at 115.99 to resume the short-term bullish momentum.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Forex and Currencies

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