EUR/JPY regains upside traction and approaches 123.00

• EUR/JPY bounces off lows and trades closer to the 123.00 level.
• Upbeat flash manufacturing PMIs improve the mood around EUR.
• Chief Powell’s testimony takes centre stage later in the NA session.

Alternating risk appetite trends appear to be lending some support to the risk complex and push EUR/JPY back to the 123.00 area on Wednesday.

EUR/JPY met support near 122.50, looks to Powell

EUR/JPY now reverses a 3-day negative streak and look to return to the area above 123.00 the figure, as sentiment in the risk-associated universe appears to have regained the smile.

In the meantime, the dollar gives away part of its earlier gains after reaching new 2-month peaks beyond the 94.00 mark when tracked by the US Dollar Index (DXY). It is worth recalling that the demand for the buck gained traction in past session on the back of an alarming increase of coronavirus cases in the Old Continent coupled with the idea that the economic recovery could be losing momentum.

Regarding the latter, advanced manufacturing PMIs measured by Markit showed the sentiment in the sector remains buoyant, with readings in all France, Germany and the broader Euroland coming in above expectations.

Earlier in the session, and on the JPY side, BoJ Governor H.Kuroda noted the domestic economy is showing some signs of recovery, although a high degree of uncertainty still prevails in the broader scenario.

Later in the session, the US dollar is expected to remain in the centre of the debate in light of the second testimony by Chief J.Powell, this time before the House of Representatives.

EUR/JPY relevant levels

At the moment the cross is gaining 0.04% at 122.90 and faces the next up barrier at 124.48 (55-day SMA) followed by 126.46 (weekly high Sep.10) and then 127.07 (2020 high Sep.1). On the opposite direction, a move below 122.51 (monthly low Sep.21) would open the door to 122.27 (100-day SMA) and finally 120.86 (200-day SMA).