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  • The cross trades on the defensive near 123.00.
  • The Japanese Yen appears bid on usual trade concerns.
  • US-China trade woes remain the key driver for markets.

The persistent bid tone around the Japanese currency keeps EUR/JPY on the defensive at the beginning of the week in the low-123.00s.

EUR/JPY focused on trade talks

The cross is reversing part of Friday’s advance, re-shifting its focus to the downside and with last week’s tops in the mid-122.00s as the immediate target if the move intensifies.

In the meantime, trade jitters remain well in place following the lack of significant progress in the latest talks in Washington. Following these meetings, both parties agreed to resume talks in Beijing in the near future, although the date was not specified.

However, uncertainty and sour mood is expected to stay in the limelight as the White House said China could face tariffs on all its products as early as in August if the Asian giant does not make some concessions.

Closer to home and in the data space, the German/EMU ZEW survey on Tuesday should give an idea of the performance of the investors’ morale in the current month, while Japanese Current Account figures are also due early tomorrow.

What to look for around JPY

The main driver behind the price action around the Japanese Yen is expected to come from the risk appetite trends and their effects on the safe haven flows. In this regard, the US-China trade concerns and prospects of slowdown in the global economy are seen sustaining the higher demand for JPY on the back of increasing nervousness among investors. On the soft side for JPY, the Bank of Japan remains strongly committed to its QQE programme, which should limit the upside potential in the currency.

EUR/JPY relevant levels

At the moment the cross is retreating 0.22% at 123.22 and a breach of 122.48 (low May 9) would aim for 122.39 (monthly low Jan.15 2017) and then 118.82 (2019 low Jan.3 ‘flash crash’). On the flip side, the next up barrier aligns at 123.91 (10-day SMA) followed by 125.25 (55-day SMA) and finally 126.80 (high Apr.17).