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EUR/JPY drops back from session highs above 128.50 to test key support at 127.50

  • EUR/JPY reversed from highs above 128.50 to lows close to 127.50 over the course of Wednesday’s session.
  • The move lower went in tandem with an elevation of safe-haven demand as broad risk appetite deteriorated.

Appetite for safe-haven assets has picked up in recent trade amid a deterioration in US (and global) equity market sentiment, EUR/JPY has been heading lower and looks on course to end the day with losses of about 0.5%. The first Omicron Covid-19 infection has been picked up in the US and, as the variant’s infection rate surges in South Africa, US stock investors have seemingly thrown in the towel. The S&P 500 is now down over 0.5% on the day having been nearly 2.0% higher in pre-market trade.

That has seen the yen catch a bid and EUR/JPY drop from earlier session highs above 128.50 back to just above weekly lows at 127.50. And the technicals aren’t looking great. When it topped out earlier in the session above 128.50, EUR/JPY seemed to find resistance at a long-term downtrend that has been capping the price action since early November. If support around 127.50 does go, the pair would slip to its lowest levels since February, which could open the door to a run lower towards 125.00, the next area of significant support.

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