EUR/JPY tumbles to session lows near 118.30

  • EUR/JPY quickly reverses Tuesday’s up move, back near 118.30.
  • Lower US yields fuel the demand for JPY.
  • Flash EMU Q2 GDP came in at 0.25 QoQ and 1.1% YoY.

The now increasing buying interest around the Japanese Yen is dragging EUR/JPY to fresh daily lows in the 118.30 region.

EUR/JPY weaker on yields, risk-off mood

The cross is fading further yesterday’s positive price action, coming under increasing selling pressure after breaking below the 200-hour and 100-hour SMAs at 118.62 and 118.45, respectively.

The risk-off sentiment has resurfaced among traders today, pushing yields of the key US 10-year note to sub-1.6% levels, area last visited in September 2016. In addition, the US 2y-10y yield curve has inverted for the first time since 2007, starting at the same time the countdown for a potential US recession (usually) within the next 22 months.

In the docket, more and more bad news for Germany, as the economy is seen contracting 0.1% QoQ during the April-June period as per today’s advanced GDP figures. In the broader euro area, Q2 GDP is expected at 0.2% inter-quarter and 1.1% YoY. Additional poor results in Euroland saw the Industrial Production contracting at a monthly 1.6% during June and 2.6% over the last twelve months.

EUR/JPY relevant levels

At the moment the cross is losing 0.72% at 118.37 and a breakdown of 117.51 (2019 low Aug.12) would open the door to 114.85 (2017 low Apr.17) and finally 113.71 (monthly low Nov.9 2016). On the upside, the next hurdle is located at 119.58 (high Aug.14) followed by 119.84 (21-day SMA) and then 121.13 (55-day SMA).

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