- EUR/JPY’s moderate monthly gain could be short-lived due to coronavirus concerns.
- Renewed lockdown restrictions across Eurozone strengthen the case for additional ECB easing.
With several Eurozone nations reimposing lockdown to control the coronavirus’s second-wave, the common currency area faces the risk of a double-dip recession. Hence, the path of least resistance for EUR/JPY appears to be on the downside.
Italy approves partial lockdown
According to Bloomberg, Italy has approved a plan to limit opening hours for bars and restaurants and shut entertainment, gambling venues, and gyms, and urged citizens not to travel.
The new measures, which are harshest since the end of May’s national lockdown, will begin on Monday and remain in effect until Nov. 24.
Further, Spain has approved a state of emergency and announced a national curfew from 11 p.m. to 6 a.m.
The new lockdown restrictions risk torpedoing the already fragile economic recovery and put more pressure on the European Central Bank to provide more stimulus. The central bank is expected to boost bond purchases from December to counter Eurozone’s negative inflation.
The Bank of Japan (BOJ), too, is likely to downgrade inflation and growth forecasts this week but is unlikely to take immediate action (ramp up stimulus).
At press time, the pair is trading at 124.10, representing a 0.42% month-to-date gain.
Technical levels
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