- The euro is steady at four-month highs above 132.15.
- Higher US T-bonds is crushing demand for the yen.
- EUR/JPY: Seen appreciating towards 137.50 – Commerzbank.
The euro has ticked up against the Japanese yen, for the eighth consecutive session, although it has failed to advance beyond the four-month high at 132.75 hit on Friday. The pair, however, maintains its positive bias intact, with bearish attempts contained above 132.15.
The euro remains strong against an ailing yen
The common currency has remained bid against the Japanese yen, in spite of the sour market mood observed during the Asian and the European morning sessions. The weaker than expected Chinese GDP and industrial production figures have revived concerns about a slowdown in the world’s second economy that could reverberate in the whole globe.
Furthermore, crude prices jumped to fresh multi-year highs earlier today, with the US benchmark WTI reaching prices past $83, bringing back inflation pressures to the spotlight and crushing appetite for risk. This has reflected on negative equity markets in Asia and Europe until a moderate pullback on oil prices brightened the mood somewhat and allowed US stocks to post a moderate recovery.
The safe-haven yen, however, has failed to take advantage of the risk-averse sentiment. The JPY remains close to four-year lows against the US dollar weighed by a solid rally on US T-Bond yields amid a widening the monetary policy differential between the Fed and the Bank of Japan, with the investors positioning QE tapering and starting to speculate about interest rate hikes in 2022
EUR/JPY: Likely to extend rally to 137.51 – Commerzbank
From a technical perspective, Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, sees scope on the pair to reach levels beyond 137.00: “EUR/JPY has maintained its gains. We look for a move to 132.69/80, the 23rd June high, and 78.6% retracement. This is regarded as the last defense for the 134.12 June peak (…) Longer-term, a break above here is favored and will introduce scope to 137.51.”
Technical levels to watch
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