- EUR/JPY affected by a sharp decline of the euro.
- The political crisis in Italy and Spain continues to weigh on the euro.
The EUR/JPY dropped further and bottomed after the beginning of the US session at 126.85, the lowest level since June 2017. From day’s high it reached on Asian hours at 128.53, lost more than 150 pips.
Hovering around 127.00
From the lows, the euro rebounded modestly, rising back above 127.00. The pair remains under 127.20, hovering around 127.00, headed toward the lowest close in 11 months.
The relief that the euro and Italian assets received at the beginning of the week was short-lived. They erased all gains and turned negative. What it was seen as positive, now appears to have deteriorated the environment after the resignation of Conte. The Five Star leader Di Maio called to a demonstration for June 2 and reiterated that the group does not what to exit the euro.
Despite all statements, the situation continues to be dominated by uncertainty as new elections loom. In Spain, also elections seem possible soon, as the parliament will vote whether to remove PM Rajoy on Friday.
EUR/JPY technical levels
To the downside, a consolidation below 127.00 could clear the way to more losses. Below support levels could be seen at 126.45 and 125.80/90. On the upside, resistance might now lie at 127.45, 127.95 and 128.50/55 (May 25 & 28 high).
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