EUR/JPY holds above bearish territory, but downside risks emerge

In line with a lack of momentum in global equities, EUR/JPY has been capped and ends on Wall Street flat having travelled from a high of 122.46 to a low of 121.92. Markets are mulling the various risks associated with being invested in potentially toxic geopolitical trades, considering the blatant road bumps along the Brexit road-map and in Sino/US negotiations. 

Risks along the global trade road maps

Brexit and US/Sino trade deals are the prominent heme for year-end and the start of 2020. Johnson’s move to change the law to guarantee the transition phase isn’t extended past end-2020 has sent a stark warning to investors that there are going to be tricky negotiations between the UK and EU that will not necessarily end well for sterling markets.

At the same time, US trade negotiator, Kudlow, says the US-China Phase One deal will double the value of the goods China will import from the US which has raised eyebrows of scepticism that China will not throw a spanner in the works and renege on such a commitment. Indeed, there are still some crucial areas which are all too vague in this agreement. In a recent press conference, China said that the US will reduce tariffs in phases while the US trade secretary Robert Lighthizer contradicted this by stating that further reductions will be discussed in the next stage of the negotiations on a ‘phase-two’ deal.

EUR/JPY levels

Analysts at Commerzbank explained that EUR/JPY’s remains above the 121.47/33 200-day moving average and the October highs. 

"...still targets the 61.8% Fibonacci retracement and lastweek’s high at 122.63/65.Into year end the June and July highs at 123.18/34 may be reached aswell. Further up sit the March low and the May 21 high at 123.65/75.Support below the 200 day moving average at 121.33 comes in at the121.01 early December high."