- EUR/JPY is basing at 123.80 and looking for a correction of the overnight supply towards the 200-hr SMA.
- EUR/JPY is caught in a sideways drift between the 23.6% Fibo and 38.2% Fibo retracements of the 2018 decline, testing the 21-D SMA to the upside but lacks conviction, especially considering the fundamentals which drive flows from the euro and into the yen.
EUR/JPY is steady in Tokyo, oscillating around the 124 handle following a sharp decline overnight on the back of a dovish ECB turnout. “The ECB held rates and stuck to the script: rates on hold until the second half of the year and repurchases will end well after the first rate hike,” analysts at ANZ bank explained.
However, the dovish tone from Draghi was the catalyst, as the analysts pointed out, saying that risks have moved to the downside, “with data consistently disappointing over the last couple quarters and geopolitical risks brewing.”
Risks ahead
Elsewhere, markets are getting set for Sino/US trade talks next week as well as the next chapter in the Brexit saga. Investors are likely to stay on the sidelines until the events unfold and offer an impetus to get on board, one way or the other. While there is likely to be some kind of progress in trade talks to trade off, Commerce Secretary Wilbur Ross put a dampener on optimism last night, when he said US and China are “miles and miles” from a resolution. As for Brexit, risks of a no-deal appear to be receding and that should be positive for markets and risk apatite, although the headlines are likely to flow and keep traders on their toes.
EUR/JPY levels
Analysts at Commerzbank explained that EUR/JPY recently saw a major spike lower a couple of weeks ago that eroded the 2012-2019 support line at 119.31 – the low was 117.845: “The move looks exhaustive and the market is consolidating. We favour near term failure and we suspect that price action here will prove pivotal and while capped here a negative bias will remain.”
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