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  • EUR/JPY had moved onto the 129 handle in a bullish opening gap following the Xi/Trump ceasefire which has lifted risk appetite, Asian stocks and US futures.  
  • EUR/JPY currently trades at 128.75 having met a high of 129.18 from a low of 128.73.  

EUR/JPY correlates will risk sentiment and tends to track equity performance closely. The pair will likely continue to perform at the start of this week so long as sentiment stays with a positive outcome from Trump and Xis agreement to hold off on additional tariffs on each other’s goods at the start of the new year to allow for talks to continue for 90 days.

Washington has agreed to leave tariffs on more than $200 billion worth of Chinese products at 10 percent. If after 90 days the two countries are unable to reach an agreement, that rate will be raised to 25 percent, according to the White House. Crucially, however, trade negotiations will now likely intensify in 2019 considering Trump’s determination to address the “Made in China 2025” project, which is likely undermining rather than boosting U.S. manufacturing, forced technology transfer and intellectual property.

Asia and US futures rallies on positive risk sentiment ahead of European and US open

For now, at least, the cease-fire picked up by Asian dealers, first of all, has played out in the Nikkei rallying through R3 up at 22670 to a high of 22696 – (Dow futures jumped more than 400 points. S&P 500 futures climbed more than 1.5 percent. Futures on oil and copper have also jumped on hopes a possible new China-U.S. trade agreement would boost global economic growth).  

EUR/JPY levels

Commerzbank analysts explained that EUR/JPY has recently eroded the 2-month resistance line at 128.67 and in doing so alleviated immediate downside pressure.

“Intraday Elliott wave counts remain negative however and for now we will allow for a near term dip lower. It should remain well supported by the four-month support line at 127.47. Further down lies the October trough at 126.64. While above here longer term scope remains on the topside. Initial resistance is the November 14 high at 129.23. Above it meanders the 55- and 200-day moving averages. To reassert upside pressure the market will need to overcome the 130.15 7 th November high.”