EUR/JPY peeps above 136.00, yield differential supports gains

EUR/JPY rises to a one-week high of 136.04.
10Y German-JP spread rises in EUR-positive manner.

Omkar Godbole FXStreet Contributor

The EUR/JPY rose to a one-week high of 136.04 in Asia, as the 10-year German (DE) and Japan yield spread hit 6-month high of 51.4 basis points (bps) yesterday.

Yield spread chart

The spread bottomed out at 23.7 bps on Dec. 11 and has risen sharply in the EUR-positive manner in the subsequent days.
EUR/JPY topped out at 136.64 on Jan. 5 and fell to 133.02 on Jan. 11 even though the spread increased from 38 bps to 45 bps during the same time frame.
The spread widened further to 51.4 bps, and that seems to have helped EUR/JPY recovery to 134.00 levels.

The EUR/JPY cross could move 36.64 (Jan. 5 high) if the yield differential continues to widen in favor of the common currency.

EUR/JPY Technical Levels

A move above 136.23 (Feb. 2014 high) would open doors for 139.00 (Aug. 2015 high). On the downside, breach of support at 134.28 (61.8% Fib R of 2015 high - 2016 low) could yield 130.84 (monthly 50-MA).

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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