- EUR/JPY regains some composure in the 120.75/80 band.
- Focus remains on trade, global yields.
- Final manufacturing PMIs in Germany, EMU matched estimates.
The continuation of the upside pressure in the European currency is motivating EUR/JPY to regain the 121.00 handle and beyond on Monday.
EUR/JPY looks to trade, risk trends
Following Friday’s deep pullback, the cross appears to have found some decent contention in the 120.80/75 band, always against the backdrop of unabated trade concerns and fears over the global growth.
In fact, recent announcements from President Trump regarding the likeliness of tariffs on US imports of Mexican products have hurt market sentiment and re-ignited concerns over the global growth.
By the same token, market participants have started to price in the probability of a rate cut by the Federal Reserve in the medium term, putting global yields under extra pressure and favouring inflows to the safe haven JPY.
In the docket, final May manufacturing PMIs in Germany and the euro area matched the preliminary readings, leaving no room for surprises. It is worth recalling that this week the focus of attention will be on the ECB meeting on Thursday.
In Japan, the manufacturing PMI came in at 49.8, a tad above expectations for the month of May.
EUR/JPY relevant levels
At the moment the cross is advancing 0.24% at 121.22 and faces the next hurdle at 122.21 (10-day SMA) followed by 122.66 (21-day SMA) and finally 123.75 (high May 21). On the other hand, a breach of 120.78 (low Jun.3) would aim for 120.54 (monthly low Jan.17 2017) and then 118.82 (2019 low Jan.3 ‘flash crash’).
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