EUR/JPY: Bulls looking to correct bearish gap in thin holiday markets
- EUR/JPY opened on the backfoot in early Asia but has started to correct with a slight offer in the yen in thin holiday trade as traders in Australiasia get ready to pack up for the day at 1410 AEDT and head into the Christmas break - (Tokyo is closed).
- EUR/JPY is currently trading at 126.30 having made a high of 126.42 from a low of 126.05.
EUR/JPY is responding to a weakness in the yen in thin holiday trade, drifting to the upside in a correction of the opening offer and bearish gap following a poor performance on Wall Street. In fact, it was the worst week for the Dow Jones Industrial Average and Nasdaq since 2008 and the worst for the S&P 500 since August 2011.
Plenty of risk weighing on US stocks
Investors are concerned over a number of factors that are pointing to a slowdown in economic growth, from the U.S indictments of Chinese on cybercrimes which dim the outlook for the trade tariffs truce that ends March 1, to lingering concerns about Italy’s economy and Brexit associated risks. The current partial shutdown of the US Federal government has also confirmed fears that had been weighing on the stock market last week.
Analysts at Commerzbank explained that EUR/JPY remains under pressure and has eroded the November and December lows at 127.50/63:
"These guard the October trough at 126.64. The 126.66/64 support area is the last defence for the 124.91/62 May and August lows. This guards the 124.08 December 2016 high and the 122.40 June 2017 low. A negative bias is now in place while below the 200 day ma at 129.63."