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Euro Soars to New Highs versus Yen

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Euro Soars to New Highs versus Yen

Data in Europe has been relatively tame and has not foreshadowed the robust climb the Euro has experienced versus the yen.  The move has been more of a function of yen weakness as the Japanese government continues to look for ways to stimulate the Japanese economy and stimulate exports.

On Monday, the Eurozone reported October industrial production figures.  German figures were weaker than expected with IP declining 1.2% month over month compare to consensus estimates of a climb of 0.7%.  Production data has recently been weaker than expected which suggests a re-acceleration of the German economy in the fourth quarter.  German trade surplus came out a bit smaller than expected, at nearly 17 billion Euros.  Exports rose 0.2% while imports rose 2.9%.   The current account surplus eased to 19.0 billion Euros.

Japan reported a surprise current account in October after a similar deficit in September.  It also reported revisions to third quarter GDP.  These revisions were to the downside as quarterly annualized growth slowed to 1.1% vs. 1.6% consensus and the initial estimate of 1.9%.  All are well down from 3.8% posted in Q2.   In the Asian session equity bourses were strong following the US’s strong session on Friday.  The Nikkei jumped nearly 2.3% while the Hang Seng climbed a more modest 0.3%.

The EURUSD pushed to new multi-year highs, and is poised to test the 150 level not seen since 2008.  Momentum is strong as the MACD (moving average convergence divergence) index is printing in positive territory with an upward sloping trajectory.  The only caveat is the RSI (relative strength index) which is now printing near 77, which is well above the overbought trigger level of 70 and could foreshadow a correction in the currency pair.

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