Forexpros – The euro tumbled against the yen on Monday, as uncertainty over the outcome of this week’s European Central Bank meeting and the bank’s ability to come up with effective measures to counter the euro zone’s debt crisis weighed on demand for the single currency.
EUR/JPY hit 95.54 during European afternoon trade, the pair’s lowest since July 26; the pair subsequently consolidated at 95.65, plunging 1.03%.
The pair was likely to find support at 94.65, the low of July 26 and resistance at 96.80, the high of July 19.
Expectations that the ECB is set to announce fresh policy measures to tackle the long running crisis in the euro zone mounted after bank head Mario Draghi pledged Thursday to do whatever is necessary to preserve the single currency.
German Chancellor Angela Merkel and French President Fran?ois Hollande vowed to defend the euro in a joint statement on Friday and said that they are “deeply committed to the integrity of the euro zone.”
But market sentiment remained fragile amid concerns that the central bank could disappoint market expectations.
Meanwhile, concerns over the outlook for the euro zone persisted after official data showed that Spain’s economy contracted 0.4% in the three month to June, extending the recession into a third quarter.
A separate report showed that the European Commission’s index of economic sentiment across the euro area dropped to a 34 month low in July, with confidence in Spain, Germany and France all dropping sharply.
The data came as Italy saw the yield on 10-year bonds fall below 6% for the first time since April at an auction of government debt earlier, indicating that investors now see Italian government debt as a somewhat safer investment.
Elsewhere, investors were eyeing the outcome of the Federal Reserve’s policy meeting on Wednesday, amid speculation over whether the bank will hint at further easing measures.
Elsewhere, the yen was higher against the U.S. dollar with USD/JPY shedding 0.37%, to hit 78.18.
Also Monday, preliminary data showed that industrial production in Japan fell unexpectedly in June, ticking down 0.1% after a 3.4% drop the previous month. Analysts had expected industrial production to rise 1.6% in June.
Later in the day, U.S. Treasury Secretary Timothy Geithner was to meet with German Finance Minister Wolfgang Schaeuble and Mario Draghi to discuss the global economy.
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