The EUR/JPY closed at 134.59 yen per euro on Wednesday, up 6 pips from the previous close, after the Japan Ministry of Finance said Japan’s growth domestic product (GDP) grew at an annualized rate of 2.4% in the first quarter, beating the 1.5% consensus forecast of economists surveyed by The Wall Street Journal. After stripping out inventories, the first quarter GDP expanded just 0.4%.

Bank of Japan (BOJ) governor Haruhiko Kuroda said in a semi-annual report at the end of April that Japan’s gross domestic product (GDP) will expand 2.0% for the fiscal year ending in March 2016, while the inflation rate is seen at 0.8%. Last month, the Japan Ministry of Internal Affairs & Communications reported 0.2% growth in the core consumer price index (CPI), which remains well below the BOJ’s target of 2.0%.

The Japanese economy seems to fare somewhat better than the eurozone’s economy, despite cheap energy, a weak euro and European Central Bank (ECB) money printing. 

According to the May 13 release from the Eurostat, the statistical office of the European Union, the eurozone’s GDP rose 0.4% quarter-on-quarter in the first quarter 2015 and a 1.0% year-over-year gain, missing the 0.5% quarterly expansion and a 1.1% annual gain expectations of economists polled by Reuters.

The first-quarter GDP from the eurozone's three biggest economies, Germany, France and Italy, are mixed as Germany grew 0.3% in the quarter, but missed the consensus forecast for 0.5% growth in a Reuters poll. French and Italian GDP, on the other hand, rose 0.6% and 0.3% in the quarter, respectively, beating expectations of a 0.4% and 0.2% expansion. 

Despite the GDP beats by France and Italy, the underlying economy is still weak. The German investor sentiment ZEW index plunged to 41.9 in May from 53.3 in April, missing expectations of 49. The International Monetary Fund (IMF) has warned France that it must reduce government spending and debt levels, as well as tackle its high structural unemployment. French unemployment just hit a fresh record high in March at 3,500,700, or over 10%. 

Italy's unemployment rate climbed to 13% in March, while youth unemployment rose to 43.1% in March, up from 42.8% in February, according to data released in late April by national statistics agency Istat.

The eurozone’s economic data continues to be mixed as the Markit's flash eurozone manufacturing Purchasing Managers' Index (PMI) came in at 52.3 for May, beating expectations of 51.8, compared to 52.0 in April. The service PMI dropped to 53.3 in May from 54.1 in April, missing the estimate of 53.9. The composite index, which combines the services and industrial sectors, came in at 53.4, compared to 53.9 for April, missing the Reuters forecast of 53.8. Any reading above 50 indicates expansion. 

The downward pressure on the euro against the Japanese yen could persist as Greek default fears grow and the ECB could extend the 60 billion euro monthly bond-buying program, beyond September 2016. 

The success of the ECB bond buying program relies on a weak euro and cheap crude oil as ECB president Mario Draghi was trying to talk down the euro last week when the EUR/USD exchange rate was ready to break out the 1.14-1.15 euros per dollar level, but without much success. The euro-dollar exchange rate plunged 1.46% to 1.1148 euros per dollar on Tuesday as ECB Executive Board member Benoit Coeure warned the markets that the ECB will frontload QE bond buying in May and June. 

Additional EUR/JPY downward pressure could come from the global central banks, which have been adding to their yen holdings in order to keep the ratio of Japan’s currency constant in dollar terms, as the yen tumbled against the greenback at the end of 2014, according to Bloomberg. The yen’s share of global reserves is about 4 percent in terms of the dollar.

From our technical viewpoint, the EUR/JPY broke out the falling wedge in late April and the price projected is 150.83 yen per euro, determined by adding the width at the top of the pattern to the point of breakout. The EUR/JPY was unable to break out the major head resistance at 136.63 yen per euro, the 23.6% Fibonacci retracement level, as Greek default fears grow and the ECB QE bond buying is in full mode. 

As pessimism around the euro persists, the EUR/JPY could dip below the 133.88 yen per euro level. The next supports are 100-day SMA, the 132.38 yen per euro and 130.78 yen per euro levels. The exchange rate could bounce from there.