- The shared currency witnessed some aggressive selling on dismal Euro-zone manufacturing PMIs.
- European bond yields fall amid firming expectations that the ECB will announce fresh stimulus.
- Reviving safe-haven demand underpinned the JPY and further collaborates to the intraday slump.
The EUR/JPY cross finally broke down of its Asian session consolidation phase and tumbled to over six-month lows, around the 120.20 region in the last hour.
The selling pressure around the shared currency picked up the pace during the early European session on Wednesday in reaction to yet another disappointing release of manufacturing PMIs, especially from Germany - the region's largest economy.
In fact, the German manufacturing sector contracted for the seventh straight month in July and dropped to its weakest pace in over 7 years, reinforcing speculations that the ECB will announce additional stimulus sooner rather than later.
The market is now pricing in a 47% probability of the ECB cutting its deposit rate by 10 bps tomorrow, up from 42% earlier, and the same was evident from a fresh leg of a slide in the German 10-year bond yields, which affected the common currency negatively.
Meanwhile, the broader Euro-zone manufacturing PMI also fell short of market expectations, which coupled with reviving safe-haven demand, provided an additional boost to the Japanese Yen and further collaborated to the pair's intraday slump.
The bearish pressure now seems to have abated, with the cross finding some support ahead of the key 120.00 psychological mark as investors refrained from placing aggressive bets ahead of the highly anticipated ECB meeting on Thursday.
Technical levels to watch
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