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EUR/JPY upside run out of steam near 126.00, looks to risk trends

  • The cross meets resistance around the 126.00 handle today.
  • Markets remain without clear direction after Easter.
  • Most markets in Europe are closed today.

Alternating risk-appetite trends are now favouring EUR/JPY and pushing it to the area close to daily highs just below the 126.00 hurdle.

EUR/JPY looks to risk trends

Following last week’s deep pullback to the 125.60 region, the cross managed to regain some composure and is now approaching the key barrier at 126.00 the figure.

In fact, poor results from flash manufacturing PMIs in core Euroland on Thursday spooked investors and triggered a wave of selling pressure in the European currency.

This sell off has been later intensified by strong data from US Retail Sales, pushing EUR/USD to weekly lows while widening at the same time the yield gap between the US and its European peers.

In the data space, the German IFO survey will be the next relevant event on Wednesday ahead of the BoJ meeting on Thursday.

What to look for around JPY

The main driver behind the price action around the Japanese Yen is expected to come from the risk appetite trends and their effects on the safe haven flows. In this regard, prospects of slowdown in the global economy are seen supporting the JPY on the back of increasing nervousness among investors. On the soft side for JPY, the Bank of Japan remains strongly committed to its QQE programme, which should limit the upside potential in the currency.

EUR/JPY relevant levels

At the moment the cross is gaining 0.09% at 125.88 and faces the next hurdle at 126.80 (high Apr.17) seconded by 127.50 (2019 high Mar.1) and finally 127.56 (200-day SMA). On the other hand, a breach of 125.65 (low Apr.18) would expose 125.49 (55-day SMA) and then 123.65 (low Mar.28).

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