EUR/JPY defends the 20-day following poor European data

• EUR/JPY found support at the 20-day SMA 155.75 but holds to daily losses.
• The Services sector in the EU held somewhat decelerated in July.
• BoJ policy tweaks expectations to make the JPY gain traction.

On Thursday, the EUR/JPY lost ground, retreating towards 156.00 but still holding the 20-day Simple Moving Average. The Euro weakened by soft Services PMIs released during the European sessions while the JPY strengthened on the back of expectations of the Bank of Japan turning hawkish.

Overall, the Service sector in the Eurozone slightly decelerated in July. The PMI service released by the S&P Global and Hamburg Commercial Bank (HCOB) from the Eurozone came in at 50.9, lower than the 51.1 expected, while the German index showed strength, beating the expectations of 52, coming in at 52.3. In addition, the French, Italian and Spanish PMIs came in slightly below the consensus.

As a reaction, the EUR is trading weak against most of its rivals but the rising German yield may limit the losses. The 10-year yield led the way, showing a 2.64% increase to 2.56%.

On the Japanese side, analysts at Rabobank see the USD/JPY retreating to 138.00 by year's end. They predict that fundamental factors will eventually drive the BoJ to leave their accommodative stance but gradually. In the meantime, the bank has been sending mixed signals to the markets, and they recently held an unexpected bond-buying operation which made the 10-year JGB rise to multi-year highs, which may hint at a possible pivot.

EUR/JPY Levels to watch

Analysing the daily chart, a neutral to bearish technical outlook is evident for EUR/JPY, suggesting that the bulls are losing momentum. The Relative Strength Index (RSI) maintains a negative slope above its midline, and the Moving Average Convergence Divergence (MACD) showed a higher red bar. On the other hand, the pair is above the 20,100,200-day SMAs, indicating a favourable position for the bulls in the bigger picture.

Support levels: 155.75, 155.00, 154.00.
Resistance levels: 156.50, 157.00, 157.50.

EUR/JPY Daily chart