Will the euro, which has become the weakest currency following the deterioration of Germany’s services PMI, continue to weaken, or will the market take a wait-and-see approach?

Will the euro, which has become the weakest currency following the deterioration of Germany’s services PMI, continue to weaken, or will the market remain on the sidelines?

18.12.2023

Last weekend, the U.S. dollar rose against the yen despite the fact that the New York Fed’s Manufacturing Index for December, released on the 15th, deteriorated sharply from 9.1 the previous month to -14.5. This was due to the improvement in U.S. industrial production for November, released on the same day, which rose to +0.2% from -0.6% the previous month.The USD/JPY pair rebounded by about 100 pips from 141.408 to 142.448, avoiding a new low. We will be watching closely to see if the US dollar continues to rebound against the yen.

Despite the improvement in Germany’s December manufacturing PMI—which rose to 43.1 from 42.6 the previous month—as announced last weekend, the euro became the weakest currency in European trading hours. The euro/yen pair fell from 156.496 to 154.406, a contrasting move to the US dollar/yen pair, which rebounded.On the 4-hour chart, the EUR/JPY pair is facing resistance along the 20-day moving average (MA), and on the daily chart, the attempt to continue rebounding from the 200-day simple moving average (SMA) has failed. Therefore, we should remain cautious as the pair may weaken against the yen toward the end of the week.

Today, the Czech Republic’s Producer Price Index is due at 5:00 PM, Germany’s IFO Business Climate Index at 6:00 PM, remarks by Bank of England Deputy Governor Broadbent at 7:30 PM, Israel’s unemployment rate at 8:00 PM, Mexico’s total demand at 9:00 PM,the Philippines’ Consumer Price Index at 10:00 PM, Canada’s New Home Price Index at 10:30 PM, the U.S. NAHB Housing Market Index at midnight, and a U.S. 6-month Treasury bill auction at 1:30 AM. We will be watching closely to see if the euro, which has become the weakest currency following the deterioration of Germany’s Services PMI, will continue to weaken.