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Forex - EUR/JPY falls as European factory data disappoints

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Shutterstock photo - The euro dropped against the yen on Wednesday after data revealed manufacturing and service-sector output failed to meet expectations across Europe, which sent investors stocking up on safe-haven positions in the Japanese currency.

Uncertainty surrounding Cyprus's efforts to tap bailout funding and avoid a banking crisis pushed the single currency down as well.

In U.S. trading on Thursday, EUR/JPY was down 1.38% at 122.48, up from a low of 122.06 and off a high of 124.38.

The pair sought to test support at 121.60, Monday's low, and resistance at 124.50, Wednesday's high.

The Cypriot parliament rejected a E.U. proposal to slap taxes on bank deposits, though the country must still find ways to raise EUR5.8 billion if it wishes to tap a EUR10 billion financial assistance package arranged by its European neighbors and the International Monetary Fund

A bank holiday remains in effect until Monday, which gives European policymakers more time to find a way out of the crisis.

Plus the European Central Bank has said it will ensure that liquidity flows into the island nation's banking system, which bolstered the euro somewhat, though softer-than-expected manufacturing and service-sector indicators sent the euro plunging against the yen.

The eurozone's manufacturing purchasing managers' index hit a three-month low of 46.6 in March from 47.9 in February, defying expectations for a gain to 48.2, according to London-based Markit Economics.

The eurozone services PMI, meanwhile, dropped to a five-month low of 46.5 in March from 47.9 in February, also defying expectations for a gain to 48.2, Markit added.

Markit also reported that Germany's manufacturing PMI fell to 48.9 in March from 50.3 the previous month, missing market calls for a 50.5 reading while the country's service-sector expanded at the slowest rate in four months.

The French manufacturing PMI came in at 43.9 in March, unchanged from February's reading, while service sector activity in France fell to a 49-month low of 41.9.

The yen served as the safe-haven currency of choice over the U.S. dollar on Thursday thanks to the Federal Reserve's recent decision to keep monetary policy loose.

The Fed said after its March monetary policy meeting concluded that it was keeping interest rates near zero and added it was making no changes to its USD85 billion monthly bond-buying program, which weakens the greenback by flooding the economy with liquidity to encourage investing and hiring.

The euro, meanwhile, was down against the pound and down against the Canadian dollar, with EUR/GBP trading down 0.71% at 0.8505 and EUR/CAD trading down 0.38% at 1.3221.

On Friday, expect the pair to move on German business sentiment data. - offers an extensive set of professional tools for the Forex, Commodities, Futures and the Stock Market including real-time data streaming, a comprehensive economic calendar, as well as financial news and technical & fundamental analysis by in-house experts.

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

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