EUR/JPY loses more than 150 pips, plummets to 18-month lows near 124

With the risk-off mood dominating the markets in the first trading day of the year, the EUR/JPY came under heavy selling pressure and lost more than 150 pips to touch its lowest level since June 2017. As of writing, the pair was down 1.35%, or 170 pips, on a daily basis.

Although there were no clear catalysts that forced investors to move towards safer assets today, another sharp fall witnessed in the U.S. T-bond yields and concerns over an extended slowdown in the Chinese economy weighed on the overall market sentiment and ramped up the demand for the JPY. Reflecting the dismal mood, major European equity indexes posted large losses and Wall Street started the day in the negative territory.

Meanwhile, the data published by the IHS Markit earlier today showed that the manufacturing sector in the eurozone continued to weaken toward the of the year with the headline PMI dropping to 51.4 from 51.8.

Commenting on the data, “The weakness of the recent survey data in fact raises the possibility that the goods producing sector could even act as a drag on the overall economy in the fourth quarter, representing a marked contrast to the growth surge seen this time last year. The last three months of 2018 saw manufacturers report the worst quarterly performance in terms of production since the second quarter of 2013,” noted Chris Williamson, Chief Business Economist at the IHS Markit.

Technical levels to consider