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  • Euro resumes decline versus yen after 2-day correction.  
  • Pair trades at 125.40, at the 20-day moving average, below a bearish short-term trendline.  

The EUR/JPY pair broke below 125.55 and fell to 125.26, reaching the weakest since April 10. Yesterday’s recovery was short-lived and the euro resumed the decline against the yen.  

The improvement in risk appetite in Wall Street has been unable to offer support to the EUR/JPY. The currency market appears to be showing different signals toward risk. The appreciation of the US Dollar against Emerging market and commodity currencies, and at the same time the fact that the yen is the best performer, points to risk aversion.  

Even the EUR/JPY pair usually holds a positive correlation with main stock indices but not today. The S&P 500 is up 0.90% above its record closing high.  

Technical outlook  

The bearish outlook remains intact and currently point to further losses particularly as it holds under the 125.50/60 area that has become the first strong resistance. To the downside, the immediate support might lie at 125.20/25; a break lower would target 124.90  and then comes 124.60.  

A recovery back above 126.10 would remove the negative tone favoring a consolidation and even a test of 126.50. The key level to clear to signal further gains is 126.80 (Mar 20, Apr 15 & 17 high).