EUR/JPY on track to end four-week winning trend

EUR/JPY reports losses as risk-off powers gains in anti-risk Japanese yen.
Stocks drop as Fed dashed hopes for a V-shaped recovery.

Omkar Godbole FXStreet Contributor

EUR/JPY is reporting over a 2% drop on a week-to-date basis and looks set to end the week on a negative note, having printed gains in the preceding four weeks.

The latest week-to-date loss could be associated with jitters in the global equity markets over the pace of economic recovery and the resulting haven demand for the Japanese yen.

The US Federal Reserve said on Wednesday that the economic recovery may take years and interest rates are likely to remain at record lows through 2022. Fed's comments gave a reality check to the markets, which had begun betting on a V-shaped economy following the last Friday's upbeat US Nonfarm Payrolls report.

As a result, investors shunned risk on Thursday and poured money into traditional safe havens like the Japanese yen. Notably, the Dow Jones Industrial Average fell by over 1,800 points or 6.9%.

At press time, the US index futures are reporting moderate gains and the uptick seems to have applied brakes on the sell-off in EUR/JPY. The pair hit a low of 120.25 early Friday and is currently trading near 120.42, representing a 0.27% decline on the day.

However, if the risk sentiment remains fragile, the pair could end up extending the decline to the 200-day simple moving average (SMA), currently at 119.48.

Technical levels

1. R3 122.81
2. R2 122.36
3. R1 121.55
PP 121.1
1. S1 120.3
2. S2 119.85
3. S3 119.04

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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