- The risk mood is fickle at the start of the week and EUR/JPY is suffering while geopolitical tensions simmer away.
- JPY net positions have been back in positive ground for seven straight weeks.
EUR/JPY has travelled further south at the start of the week, extending last week’s decline from the vicinity of the 120 handle. Today, the cross has traded between a high of 118.79 and 117.75, tracking a poor performance in European equities.
The risk mood is fickle at the start of the week while the euro is one of the best performers on the board, albeit sliding below the 1.10 handle vs the greenback and travelling south below trend line resistance. However, net short positions dropped to their most extreme levels since June while some members of the European Central Bank Governing Council pushed back against the easing package announced at the September policy meeting.
Geopolitics simmer away
Going forward Italian politics and Brexit remain potential negative factors for the euro and the cross can continue to struggle in a risk-off bias environment while the release of weak German manufacturing data added to the downside action as investors continue to mull over forever changing trade negotiation headlines between the US and China. Meanwhile, JPY net positions have been back in positive ground for seven straight weeks on safe-haven demand due to fears over the outlook for the global economy – While hopes for high-level trade talks between the US and China in October have been a temporary bullish factor, tensions between the US and Iran have escalated.
EUR/JPY levels
EUR/JPY remains below the 38.2% Fibonacci retracement at 120.05. “Above it resistance can be seen between the June lows at 120.79/96 as well as at the 121.38 late July high. Minor support below the September 20 low at 118.47 comes in at the 117.55/52 August 12 and September 12 lows. Further support can be seen at the 116.58/115.87 recent lows,” analysts at Commerzbank explained.
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