- Wall Street printing fresh highs on the tape, sending EUR/JPY lower.
- Dollar rallies across the board on higher US yields.
EUR/JPY has lost some ground, backing away from the 131.50 highs and is risking its footing on the 131 handle altogether as the dollar firms up in the NY session. EUR/USD dropped when the DXY rallied from a touch below 94.50 to session highs of 96.65. EUR/USD subsequently fell to a session low of 1.1652 from highs of 1.1724 traded at the start of the US shift. EUR/JPY is currently trading at 131.12, off from 131.50 but still way up from the lows down at 130.29
Investors have been somewhat complacent to the potential ramifications in China retaliating to Trump’s fresh round of tariffs that will be implemented on the 24th of this month at 10%, scaling up to 25% in December. China came back with their retaliation tariffs on US Goods – These will be effective on 24 September, with rates ranging between 5 and 10% on $60b. The Chinese have also filed a complaint to WTO on the latest US tariff measures on $200Bln worth of Chinese goods – (RTRS).
Dollar fueling the downside in the crosses
Nevertheless, the DJIA continues to print fresh highs on the tape at 26313.20 so far and the S&P does as well, scoring a fresh high of 2912.13. USD/JPY, as a result, has moved up to 112.39, a new 9-week high, and there are little signs of the tables turning at the moment. US 1- year yields are fueling the dollar’s rally, whereby they too have rallied up to 3.043%.
EUR/JPY levels
Analysts at Commerzbank explained the market faces resistance that extends up to 131.98:
“This is the location of the 55-week ma and the July high. While it is possible that this will provoke some profit taking, Elliott wave counts suggest that dips should now hold at circa 129.70/00. A move above the July high at 131.98 would re-target the 133.48 April peak. Below 127.85 would leave the market back on the defensive and suggest losses back to the 124.91 mid August low. Only if support at 124.91/62 were to give way, would the area between the December 2016 high and the June 2017 low at 124.09/122.40 be back on the plate.”
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