- The United States has effectively declared war on Iran and spells downside for the cross.
- EUR/JPY has based on the way towards 119.91 as the 78.6% Fibonacci retracement.
EUR/JPY has based on the downside following a steep hourly decline from upon the 123 handle landing just shy of the 25th June swing lows in the 121.60s completely reversing the opening gap and accelerating in yesterday’s Toyo session. The cross continued to sell-off as investors took the ceasefire news as a pinch of salt and a drop in the ocean of extensive geopolitical risks that perked up following the Iran news.
The United States has effectively declared war on Iran. On Monday the official Iranian news agency announced that the nation has breached the limits for enriched uranium imposed on it by the 2015 international agreements and this has antagonised the Trump administration and roiled markets. However, there are no signs of actual military action from the States but rather, its wide-ranging sanctions campaign is strangling Iran’s economy, in trying to force Tehran to permanently dismantle its capacity to develop a nuclear bomb.
How does this all related to EUR/JPY?
The cross is traded as a proxy to global equities. The yen leg of the cross is considered to be safe havens amongst the major currencies. Investors move typically move away from DAX and S&P500 in times of uncertainty and crisis and EUR/JPY typically falls as flows move out of the euro and into the yen.
EUR/JPY levels
Analysts at Commerzbank explained that they expected EUR/JPY to fail to overcome the 123.80/50% retracement level and now expect it to head towards 119.91 as the 78.6% Fibonacci retracement. “This is the last defence for the 117.85 January spike low. Resistance is offered by the 123.75/80, May 21 high and Fibonacci retracement and this maintains an overall negative bias and protects 125.52 78.6% retracement and the 200-day ma at 125.84.”
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