Search ForexCrunch
  • EUR/JPY managed to squeak out fresh multi-year highs around the 127.20 mark on Wednesday but has since slipped back under 127.00.
  • The pair was lifted amid a risk-on market vibe.
  • JPY might recover some ground if concerns regarding violence in Washington escalate.

EUR/JPY saw significant upside during the early part of Wednesday’s European session, rallying from below 126.50 to above 127.00 and then onto fresh highs since March 2019 above 127.20. Driving the move has been the market’s broadly risk-on reaction to the news that the Democrats had won a surprise victory in the US Senate elections in Georgia, handing them control over the legislation that will be able to pass in Congress. Markets are betting that that means significant additional fiscal stimulus, hence why US and global stocks, crude oil markets and risk-sensitive currencies moved higher and why JPY has underperformed.

EUR/JPY has slipped back from highs in recent trade, however, and is under 127.00 again, with the bulls lacking the conviction as of yet to push the pair towards 2019 highs at 127.50. A further improvement in the market’s appetite for risk over the coming days might be enough to do it.

Such a move seems unlikely to happen during Thursday’s Asia session. Risk appetite has taken a knock in recent trade and JPY has picked up a tad amid concerns over violence in the US Capitol, as pro-Trump protestors seek to disrupt the Congressional certification of the November 2020 presidential election result. The situation will likely be brought under control soon, and Congress to be able to return to certifying the election, but risks of further “hiccups” in the transition to the Biden administrations over the next few weeks will be worth watching out for.

At present, EUR/JPY trades with gains of around half a percent on the day or just under 70 pips.

EUR/JPY looking for a decisive break above 127.00

EUR/JPY is looking for a decisive break above 127.00 that has eluded the pair on multiple occasions since August 2020. Back in August 2020, the pair managed to fleeting hit highs in the 127.10s, before sliding back to lows under 1.2200. Since mid-December, the pair has again been flirting with the 127.00 level, but despite making it as high as 127.20 on Wednesday, it has slipped back below. Bulls are on notice for a decisive break above this level that would bring into focus the 2019 high of 127.50.

EUR/JPY weekly chart