EUR/JPY: Another U-turn from 10-day EMA amid fresh risk aversion wave

• EUR/JPY pulls back as markets question previous optimism backed by receding trade war fears.
• News reports of the US senators warning not to investors in Chinese companies and the PBOC’s preference for additional easing mainly triggered the latest risk-off.
• German GDP, trade headlines will offer fresh impulse.

Failure to provide a daily closing beyond 10-day exponential moving average (EMA) drags the EUR/JPY pair down to 117.55 during the Asian session on Tuesday.

While receding fears of the full-fledged US-China trade war weakened the safe-havens, like the Japanese Yen (JPY), on Monday, prices are likely witnessing downside pressure due to doubts over the recent trade optimism.

Chinese media questioning the US President Donald Trump’s claim that he received two very good calls from Beijing initially spread the skepticism that was stretched after Xinhua reported People’s Bank of China (PBOC) Governor’s push for new loans, which can weaken the Chinese Yuan (CNY) and the US doesn’t like it happening.

Accelerating the risk-off sentiment was the Union Leader piece that mentions the US senators’ warning to invest pension funds in Chinese markets.

In response to the market mood, the US 10-year treasury yield drops near two basis points (bps) to 1.527% by the press time compared to previous day’s recovery.

Other than the qualitative catalysts, German GDP numbers for the second quarter (Q2) of 2019 also gain market attention for fresh direction. Forecasts concerning the growth numbers from the EU’s largest economy show no change from earlier releases of 0% and -0.1% on a QoQ and YoY basis respectively.

Technical Analysis

Only a daily closing beyond 118.00, comprising 10-day EMA, can propel prices to August 06 high near 119.88 and then to 120.00, other than that odds of pair’s additional declines to the latest low of 116.57 and then towards the year 2017 bottom of 114.85 are high.