EUR/JPY downside in play with yen strength and bearish Wall Street

Currently, EUR/JPY is trading at 118.38, down -0.20% on the day, having posted a daily high at 119.08 and low at 118.13.

EUR/JPY has dropped from the high end of the 118 handle down to test the 118.12 low and a key support area as seen back on the 23rd and 26th of March most recently and late July highs of 2016. The yen has picked up the pace across the board, losing the 111 handle vs the dollar while stocks decline heavily in the US session with the benchmarks deep in the red, supporting the supply in the cross. 

An area to monitor is inflation. Kit Juckes, an economist at Societe Generale, explained, "If there's one indicator to watch at the moment, it's the trend in breakeven inflation rates. US 10year breakevens are drifting gently lower, below 2% now. Comments from investors, and from central, bankers, reflect the sense of uncertainty now about whether core inflation is going to get back to or above target for a sustained period of time. Japanese 10year breakevens are at 0.5% now, down from a peak above 0.6% in December. Germany's are at 1.2%, down from a 1.35% peak in January."

EUR/JPY levels

EUR/JPY: neutral to negative bias - Commerzbank

Analysts at Commerzbank explained that EUR/JPY's near term outlook is neutral to negative: "EUR/JPY remains vulnerable to the 117.30 2016 to 2017 uptrend, which is expected to hold. Intraday rallies are indicated to fail circa 120.40/75."