EUR/JPY drops to key trendline support amid risk aversion in equities

• EUR/JPY is facing selling pressure, possibly due to risk aversion in the equity markets.  
• The pair has tested support of trendline falling from September 2018 highs.  
• A deeper drop could be seen if German yields extend Tuesday’s drop.  

EUR/JPY is flashing red amid risk-off tone in the financial markets.  

As of writing, the pair is trading at 120.54, representing a 0.12% loss on the day, having printed session lows on the support of the trendline falling from September 2018 and April 2019 highs at 120.43.

The Anti-risk JPY is drawing bids, possibly due to losses in the equities. At press time, the futures on the S&P 500 are down 0.20%. Benchmarks in Australia, New Zealand, and South Korea are also reporting losses. Japan’s Nikkei, however, is currently adding 0.26%.  

The risk-off mood could be associated with the lingering Brexit uncertainty.  British lawmakers on Monday rejected the timetable to fast-track legislation for Prime Minister Boris Johnson Brexit deal, dashing hopes of Britain leaving the European Union before the Oct. 31 deadline.  

Looking forward, the pair may find acceptance below the trendline support of 120.43 if the equity markets remain on the defense and the German bond yields extend Tuesday’s drop, weakening the bid tone around the EUR.  

On Tuesday, the 10-year German bond yield fell by four basis points to -0.38%.  

Technical levels