- The cross drops further south of the 126.00 key support.
- The selling pressure in EUR weighs on the cross.
- German IFO survey surprised to the downside in April.
The offered bias around the single currency is now forcing EUR/JPY to remain on the defensive below the 126.00 handle.
EUR/JPY weaker on sentiment, data
The cross is down for the second straight session today, extending the recent breakdown of the key 126.00 barrier, coincident with the 10-day SMA.
The downside momentum around the European currency has picked up traction today after the key gauge of sentiment in Germany, the IFO survey, failed to re-ignite hopes of a rebound in April.
In fact, Business Climate dropped to 99.6 for the current month, a tad lower than the previous reading although within the broader downtrend seen since August 2018.
Looking ahead, the Bank of Japan will hold its monetary policy meeting tomorrow seconded by the usual press conference by Governor H.Kuroda. Market consensus expects no changes to the current QQE programme nor significant announcements by the central bank.
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 retreating 0.18% at 125.34 and a breach of 124.77 (low Apr.10) would expose 124.27 (low Mar.8) and then 123.65 (low Mar.28). On the upside, the next hurdle aligns at 126.00 (10-day SMA) followed by 126.80 (high Apr.17) and finally 127.50 (2019 high Mar.1).
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