EUR/JPY probing one-month lows, though held by decent support for now

  • EUR/JPY has reversed an attempt earlier in the session to hit 131.50 and is back below 131.00.
  • The pair is finding solid support, however, though if risk appetite continues to deteriorate, it could drop towards 130.00.

It’s been a choppy session today for EUR/JPY though, ultimately, the pair is set to end the day flat after moves elsewhere in FX markets stole the limelight (the dollar surged to fresh annual highs). At the start of US trading hours, EUR/JPY swung as high as the 131.40s to hit a key Fibonacci retracement level (the 38.2% retracement back from the October highs to the summer lows), before paring all of these gains to fall back to the 130.75 region. That means the pair is back to probing near-one-month lows. However, EUR/JPY is receiving support from a number of key levels including the 50% retracement from the October high back to the summer lows, the 50-day moving average (DMA) at 130.60, the 29 September high at 130.47 and the 200DMA just below it at 130.45.

With inflation concerns in the US triggering downside in US equities, not least given concerns that the Fed will be forced to remove monetary stimulus sooner to address elevated price pressures, risk appetite looks at risk of seeing further deterioration in the sessions ahead. That should favour the safe-haven Japanese yen over the euro.

If a further downturn in stocks and broader risk appetite does favour the safe-haven yen and push EUR/JPY below the next notable area of support, this would open the door to a run at the psychologically important 130.00 level. This level coincides with the 61.8% Fibonacci retracement between EUR/JPY’s summer lows at around 1.2800 and the October highs at 133.50. A break below here could signal an eventual move all the way back to these summer lows.

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