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  • EUR/JPY has for the most part traded sideways on Thursday, stuck between its 21 and 50-day moving averages.
  • The yen was broadly weighed by a risk on market tone, while the euro is suffering from US dollar strength.

EUR/JPY has for the most part traded sideways on Thursday, amid a lack of any key Eurozone or Japanese economic catalysts; the pair has remained largely stuck between its 21 and 50-day moving averages at 126.30 and 126.145 respectively. At present, the pair trades 0.1% or about 13 pips lower on the day ahead of the Thursday FX close at 22:00GMT.

Driving the day

Safe haven JPY was weighed on Thursday amid another day of gains for global equity and crude oil markets. Risk appetite has been well supported given a number of bullish market undertones; news flow coming from Congress continues to suggest that more US fiscal stimulus, and another hefty dose at that, is on the way. This ought to boost economic activity in the US (and world via increased import demand), which ought to boost fuel consumption.

Moreover, data out of the US this week suggests that, actually, economic activity has held up better than expected in January. Strong ISM PMI reports, a strong ADP National Employment report and Thursday’s strong weekly jobless claims data all beat expectations; all point to a strong NFP number on Friday. All of

Moving away from stimulus and the US economy for a second, pandemic news flow this week has largely been upbeat and last week’s concerns regarding vaccine distribution delays is in the rear-view mirror. Positive data on vaccine efficacy has instilled greater levels of confidence that vaccines will work, vaccination efforts in major economies have accelerated and infection rates in most countries appear to have peaked. Crucially, ahead of Lunar New Year holidays next week, China appears to have gotten a mini Covid-19 outbreak under control.

All of this has been bad for JPY. But that wasn’t enough to lift EUR/JPY. In fact, the euro has underperformed JPY on Thursday; all of the above optimism (in particular to do with strong US data, US fiscal stimulus hopes and the US’ comparatively swift vaccination efforts versus the Eurozone) seem to be lending a hand to the USD. The chief victim of all of this US dollar strength over the last few days has been the euro. Perhaps, as mentioned, this is in part as a result of all the bad press the bungling Eurozone vaccination has gotten, compared to a comparatively smooth US effort, implying the US will have the virus under control ahead of the European mainland.

Looking ahead for the pair; Japanese Household Spending data for December, out at 23:30GMT, will be of note for the Yen traders. Meanwhile, German Factory Orders for December out at 07:00GMT and then French Trade numbers for December at 07:45GMT will be of note on Friday for the euro traders. But the pair is most likely to trade as a function of risk appetite if anything.