EUR/JPY ignores yield differential, finds acceptance above the key Fib

  • EUR/JPY rally isn't backed by yield differential.
  • The pair has scaled 38.2 percent Fibonacci retracement of Feb-Mar sell-off.
  • The EUR could run into offers if Deutsche bank news weighs over banking stocks.

The EUR/JPY pair has rallied 2.76 percent since March 23 despite the range bound 10-year German-Japan yield differential.

The spread has been restricted to a narrow range of 45 to 49 basis points since March 23. Despite the unfavorable yield spread, the EUR/JPY has found acceptance above 132.21 - 38.2 percent Fibonacci retracement of the drop from Feb. 2 high of 137.51 to March 23 low of 128.94.

That said, the yield differential might come into play this week. Reports are doing the rounds the European Central Bank has asked Deutsche Bank to calculate the potential impact of winding down its investment banking operations. The German lender has called it a routine exercise. However, the yield spread may drop in the EUR negative manner if Deutsche bank shares react negatively to the news.

EUR/JPY Technical Levels

The pair opened at 132.65 and was last seen trading at 132.45. A break above 132.65 (session high) would open doors for 132.90 (Friday's high) and 133.03 (100-day MA). On the downside, breach of support at 132.21 (38.2 percent Fibonacci retracement) could yield a pullback to 131.77 (ascending 10-day MA) and 131.60 (Feb. 14 low).

  TREND INDEX OB/OS INDEX VOLATILY INDEX
15M Bearish Neutral Low
1H Bullish Neutral Low
4H Neutral Shrinking
1D Bullish Overbought Shrinking
1W Strongly Bearish Neutral High

 

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