- EUR/JPY drops to 127.50 in Asia – the lowest level since Aug. 22
- The currency pair breached the 200-week EMA support of 128.13 in the overnight trade.
- Risk aversion has put a strong bid under the anti-risk JPY.
- ECB’s Draghi to downplay risks, unlikely to change guidance.
The Japanese yen is flying high across the board, courtesy of heightened risk aversion in equities.
At press time, the EUR/JPY is trading 127.60 – down 0.20 percent on the day – having hit a two-month low of 127.50 earlier today.
Stepping back, the currency pair shed more than 100 pips yesterday and found acceptance below the key 200-week EMA support of 128.13 as the Dow Jones Industrial Average (DJIA) fell more than 600 points, triggering a flight to safety.
The tech-heavy Nasdaq fell 4.6 percent. Further, the S&P 500 dropped well below its 50-week EMA of $2,729, opening the doors to the February low of 2532. Hence, the path of least resistance for the EUR/JPY is on the downside.
That said, the bearish momentum may weaken in the early US session if ECB’s Draghi downplays risks and confirms the end of asset purchases in December. Analysts at Nomura do not expect too much news from today’s ECB meeting.
EUR/JPY Technical Levels
Resistance: 127.86 (Sept. 10 low), 128.32 (Oct. 18 low), 128.93 (10-day EMA)
Support: 127.00 (June 21 low), 126.85 (76.4% Fib R of Aug. 15 low/Sept. 21 high), 126.64 (June19 low)
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