- EUR / JPY was unable to capitalize on its rally, but instead encountered new offers near the 126.35-40 zone.
- A strong recovery in demand for the JPY was seen as a key factor putting pressure on the cross.
- Market optimism and a strong euro should help limit the deepest losses, at least for now.
It was observed that the crossing EUR/JPY It is trading near the lower end of its daily trading range, and the bears are now looking to extend the slide below 126.00.
The cross struggled to capitalize on the opening of the bullish gap and an intraday rally to the 126.35-40 region, instead meeting new offers amid the emergence of some buying around the Japanese yen. Despite the prevailing optimism in the market, the strongly offered tone around the USD provided a modest rise to the JPY, which was seen as a key factor putting some pressure on the EUR / JPY cross.
Global risk sentiment was well supported by recent optimism about the launch of vaccines for the highly contagious coronavirus disease. This, along with hopes for further US fiscal stimulus measures, continued to boost investor confidence. This, in turn, could undermine demand for the safe-haven JPY and help limit deeper losses for the EUR / JPY cross, at least for now.
Meanwhile, widespread USD weakness extended some support to the shared currency. This could prevent investors from placing aggressive bearish bets around the EUR / JPY cross. Therefore, it will be prudent to wait for a solid follow-up to sales before confirming that the positive post-ECB movement has worn off and you have positioned yourself for any further short-term depreciation movement.
Moving forward, market participants are now looking forward to this week’s key releases of the Eurozone PMI flash releases for December. Apart from this, the overall market will influence the JPY as a safe haven and will help traders determine the next leg of a directional move for the EUR / JPY cross.
Technical levels
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