EUR/JPY looking for direction below the 123.00 mark
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EUR/JPY looking for direction below the 123.00 mark

  • EUR/JPY exchanges gains with losses in sub-123.00 levels.
  • US-China trade, geopolitics keep driving markets’ mood.
  • A test of the 122.00 neighbourhood remains a palpable chance.

EUR/JPY continues to trade within a broad consolidative theme around the 123.00 handle, although a surpass of this important hurdle still remains elusive.

EUR/JPY focused on trade, risk trends

The absence of relevant headlines in the protracted US-China trade dispute leaves developments from the US-Huawei effervescence as one of the main drivers among market participants in past hours.

In fact, Chinese tech giant Huawei is the centre of the storm nowadays after the White House blacklisted the company and later prohibited American firms to trade software and components with the Asian company.

Nothing from the euro calendar today, while ECB’s VP L.De Guindos said at an event in London that the ongoing slowdown in the region could prompt some banks to increase their capital buffers. He also added that the mentioned deceleration favours the occurrence of tail events.

What to look for around JPY

The main driver behind the price action around the Japanese Yen is expected to come from the risk appetite trends and their effects on the safe haven flows. In this regard, the US-China trade concerns plus rising geopolitical fears from US-Iran friction and the potential slowdown in the global economy are seen sustaining the higher demand for JPY. On the soft side for JPY, although largely priced in byt investors, the Bank of Japan remains strongly committed to its QQE programme.

EUR/JPY relevant levels

At the moment the cross is gaining 0.01% at 122.90 and faces initial resistance at 123.61 (high May 10) followed by 123.79 (21-day SMA) and finally 125.23 (monthly high May 1). On the other hand, a breach of 122.08 (low May 15) would aim for 120.54 (monthly low Jan.17 2017) and then 118.82 (2019 low Jan.3 ‘flash crash’).

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