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  • The USTR announced fresh Section 301 investigation on French Digital Services Tax (DST) Bill.
  • Rumors of the US preparing an airstrike in Syria also propelled risk-off sentiment.
  • ECB’s dovish bias plays its role as well.

With the US Trade Representative (USTR) setting up a Section 301 investigation on to the French DST Bill, coupled with the rumors surrounding the US air strikes over some part of the Iranian targets in Syria, the EUR/JPY pair drops to 121.96 amid Thursday morning in Asia.

France’s 3% tax on total annual revenues of companies providing certain digital services to, or aimed at, French users got an ire from the US President Donald Trump as he ordered the USTR to investigate whether it will hurt the US companies offering such services in France or not.

The US has previously announced Section 301 investigation on Chinese trade practices and European Union subsidies on large commercial aircraft that largely triggered the market risk-off momentum.

Adding to the risk-off momentum was rumors that can increase the US-Iran political tension and the on-going trade tension between the US and China.

The global barometer for risk tone, the US 10-year treasury yield declines to 2.053% by the press time.

Further, dovish comments from the European Central Bank’s (ECB) Governing Council member Benoit Coeure  and chief  economist Philip Lane also have the aftershocks present on the regional currency.

While trade/political headlines will keep entertaining the pair traders, German CPI, comments from ECB’s Coeure and ECB Monetary Policy Meeting Accounts could offer an interesting day for trading going forward. Germany’s Consumer Price Index (CPI) may remain unchanged at 0.3% MoM in June while the Harmonized Index of Consumer Prices might also hold its previous 1.3% readout.

Technical Analysis

50-day simple moving average (SMA) level of 122.35 acts as an immediate upside barrier to cross in order to question the strength of current month high around 123.36. On the flipside, 121.30 and June month low near 120.78 may act as intermediate halts during the south-run toward 120.00 psychological magnet.