- The cross breaches the key support at 123.00 the figure.
- The leg lower tracks the strong demand for the Japanese currency.
- US-China trade negotiations remain in centre stage.
Souring risk sentiment continues to lend support to the safe haven JPY, in turn dragging EUR/JPY to fresh multi-week lows in the mid-122.00s.
EUR/JPY focused on trade concerns
The leg lower in the cross remains well in place on Thursday, posting weekly losses in three out of the last four weeks after failing to advance further north of the 200-week SMA near 126.70 in mid-April.
The stronger demand for safer assets in the current context of risk aversion on the back of rising US-China trade concerns have been lending extra legs to the Japanese currency, therefore sustaining the down move in the cross.
Later in the week, all the attention will be on the meeting between US and Chinese officials in Washington, with the trade agreement on top of the agenda of course and in light of the implementation of higher tariffs on Chinese products, expected to kick in 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 0.23% at 122.91 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). On the flip side, initial hurdle emerges at 124.14 (10-day SMA) followed by 125.34 (55-day SMA) and finally 126.80 (high Apr.17).
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