EUR/JPY: De-coupled from European stocks as focus stays on U.S. benchmarks

EUR/JPY is currently trading at  121.44, a touch lower at the start of the week, despite a solid performance from European stocks with the German DAX +0.6%. The yen is finding a bid with US 10-year yields bleeding out sub 2.10% which is weighing on USD/JPY. At the same time, U.S. stocks are heavy with investors treading cautiously, especially with the S&P 500 now above the psychological 3000 mark. On Friday, the DJIA added 244.02 points, or 0.90%, at 27,332.10, while the S&P 500 index added 13.83 points, or 0.5%, to close 3,013.75. The Nasdaq Composite Index ended 48.10 points higher at 8,244.14, a gain of 0.6%.

Markets have been mostly rising on the promise of easy-money policies from the likes of the Federal Reserve and the European Central Bank, with some investors speculating that anticipation a further round of monetary-policy stimulus from Beijing’s central bank has also helped to soften the impact of a relatively weak GDP print.

EUR/JPY is fundamentally hanging in balance of how global benchmarks will perform and relative to the risk apatite in markets which will likely determine the value of the yen. One would expect a major recovery in the cross on signs that trade wars are moving towards a resolve - Over two recent tweets, Trump said China wants to make a trade deal and insisted that U.S. taxpayers aren’t paying tariffs. 

EUR/JPY levels

Technically, analysts at Commerzbank explained that EUR/JPY is sidelined just above the 2019 uptrend line at 121.37 and the 120.79 June low, near term rebounds remain tepid at best. 

"It should eventually, fail here and then head to the 119.91 78.6% Fibonacci retracement. This is the last defence for the 117.85 January spike low."