EUR/JPY bounces off 3-month lows near 129.60

  • EUR/JPY remains on the defensive and drops below 130.00.
  • JPY appreciates further on falling US yields.
  • The ECB announced a symmetric 2% inflation target.

The solid pace of the Japanese safe haven weighs heavily on the risk complex and dragged EUR/JPY to new 3-month lows in the 129.60 region on Thursday.

EUR/JPY under pressure on risk-off mood

EUR/JPY loses ground uninterruptedly since last Friday on the back of the persistent bias towards the risk aversion, strong dollar and lately the perseverant appreciation of the Japanese currency in response to declining US yields.

Indeed, yields of the key US 10-year note dropped to fresh 5-month lows earlier in the session after they reached the 1.25% area, just to bounce back to the 1.30% neighbourhood at the time of writing.

Closer to home, no surprises from the ECB’s strategy review, as Chairwoman Lagarde announced the central bank changed its inflation target to a “symmetric 2%” goal over the medium term. In addition, the ECB will keep the CPI as the appropriate measure for inflation, but it will now include some measures of the housing sector (costs of owner-occupied housing).

The central bank considers higher inflation as largely transitory and it has avoided so far any mention of tapering for the foreseeable future, keeping the broad-based dovish tone unchanged.

In the calendar, the German trade surplus shrank to €12.6 billion in May and the Current Account surplus also narrowed to €13.1 billion in the same period. In the US, Initial Claims rose by 373K WoW a tad below consensus.

EUR/JPY relevant levels

So far, the cross is retreating 0.33% at 130.00 and faces the next support at 129.62 (monthly low Jul.8) followed by 128.29 (weekly low Mar.24) and then 128.12 (200-day SMA). On the other hand, a surpass of 131.02 (100-day SMA) would aim for 132.36 (50-day SMA) and finally 132.69 (weekly high Jun.23).

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