EUR/JPY struggles to keep gains above 119 despite dismal Japanese GDP

• EUR/JPY has backed off from session highs above the 119.00 mark. 
• Dismal Japanese GDP has failed to inspire Yen sellers. 
• Risk sentiment remains vulnerable to coronavirus scare.

The downbeat fourth-quarter Japanese gross domestic product (GDP) data released Monday morning failed to inspire Yen selling, making it harder for EUR/JPY to establish a strong foothold above the 119.00 handle. 

Biggest contraction in five years

Japan's GDP contracted an annualized 6.3% quarter-on-quarter in the final three months of 2019 to register the biggest quarterly contraction in five years, the official data released a few minutes before press time showed. 

The average forecast of 34 economists surveyed by the Japan Center for Economic Research was for a decline of 3.55%. 

Even so, the EUR/JPY cross extended its decline from the session high of 119.07 to 118.90, possibly because the markets were braced for a marked slowdown/contraction following October's sales tax hike. 

Consumer spending fell 2.9% as the national sales tax was raised in October to 10% from 8%. During the same month, Typhoon Hagibis ravaged a large swathe of the country, according to the Nikkei Asian Review. 

Also, the focus now is on the country's economic performance in the first quarter.

Virus scare favors Yen strength

Chinese officials are struggling to tame the coronavirus fears. There were 100 more deaths due to the novel coronavirus in China's Hubei province Sunday, the health authorities there said. 

Further, more than 1,900 additional cases of the virus were confirmed Sunday, Hubei authorities said, bringing the total number of cases in the center of the outbreak to 58,182, according to CNN. 

The virus scare could keep risk assets under pressure, helping the anti-risk Japanese yen score gains during the day ahead. That said, the futures on the S&P 500 are currently printing 0.10% gains. If the risk sentiment remains positive, EUR/JPY could rise convincingly above the 119.0 handles. At press time, the pair is flirting with the psychological hurdle.

Technical levels