EUR / JPY bounces from lows near 128.20, on the lookout for FOMC Minutes

• EUR / JPY regains some composure and bounces away 128.20.
• The final July CPI of the EMU stood at 2.2% year-on-year, the underlying CPI at 0.7% year-on-year.
• Investors remain cautious ahead of the FOMC Minutes.

The softer tone of the dollar in combination with the prevailing selling pressure on the Japanese currency motivates the cross EUR/JPY to recover from the lows initially touched in the 128.20 area.

EUR / JPY now look at the FOMC

The EUR / JPY manages to regain the smile after four consecutive daily pullbacks, including the break of the ever-relevant 200-day SMA, just above 129.00 today.

Investor preference for safe havens triggered a moderate downward correction at the cross since Monday, breaking below the consolidation theme in effect since mid-July and revisiting the levels last seen in early March at Same time.

The bullish bias of the Japanese yen comes in response to the improvement in returns of the key US 10-year benchmark to near the 1.28% level so far.

In data space, Japan’s trade surplus widened to 441 billion yen in July and machinery orders expanded 18.6% year-on-year through June. For the final CPI in Euroland it rose 2.2% year-on-year in July and 0.7% excluding food and energy costs, both figures in line with preliminary data.

Later in the American session, all attention is expected to be on the release of the FOMC Minutes, where market participants will seek details on any discussion on the timing of the QE phasing out.

Technical levels

So far, the cross is gaining 0.28% at 128.63 and a breakout of 129.01 (200-day SMA) would expose 130.01 (August 5 high) and then 130.56 (July 29 weekly high). On the downside, the next support comes at 128.22 (August 18 monthly low) followed by 128.29 (March 24 low) and finally 127.02 (78.6% Fibonacci from March to June rally).