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  • EUR/JPY failed to capitalize on its uptick, instead met with a fresh supply near the 126.35-40 zone.
  • A strong pickup in demand for the JPY was seen as a key factor exerting pressure on the cross.
  • The upbeat market mood, stronger euro should help limit any deeper losses, at least for now.

The EUR/JPY cross was seen trading near the lower end of its daily trading range, with bears now looking to extend the downfall further below the 126.00 mark.

The cross struggled to capitalize on the bullish gap opening and an intraday uptick to the 126.35-40 region, instead met with some fresh supply amid the emergence of some buying around the Japanese yen. Despite the prevalent upbeat market mood, the heavily offered tone surrounding the USD provided a modest lift to the JPY, which was seen as a key factor exerting some pressure on the EUR/JPY cross.

The global risk sentiment remained well supported by the recent optimism over the rollout of vaccines for the highly contagious coronavirus disease. This, along with hopes for additional US fiscal stimulus measures, continued boosting investors’ confidence. This, in turn, could undermine demand for the safe-haven JPY and help limit deeper losses for the EUR/JPY cross, at least for the time being.

Meanwhile, a broad-based USD weakness extended some support to the shared currency. This might further hold investors from placing aggressive bearish bets around the EUR/JPY cross. Hence, it will be prudent to wait for some strong follow-through selling before confirming that the post-ECB positive move has run out of the steam and positioning for any further near-term depreciating move.

Moving ahead, market participants now look forward to this week’s key releases of the flash Eurozone PMI prints for December. Apart from this, the broader market will influence the safe-haven JPY and further assist traders to determine the next leg of a directional move for the EUR/JPY cross.

Technical levels to watch