- EUR / JPY managed to hit new multi-year highs around 127.20 on Wednesday, but has since dropped below 127.00 again.
- The pair rose amid an environment of risk appetite.
- JPY could regain some ground if concerns rise about violence in Washington.
He EUR/JPY saw a significant uptick during the early part of the European session on Wednesday, rising from below 126.50 to above 127.00 and then to new highs since March 2019 above 127.20. The driving force behind the movement has been the largely risky market reaction to news that Democrats had won a surprise victory in the US Senate elections in Georgia, handing them control over legislation that could be passed in Congress. Markets are betting that that means significant additional fiscal stimulus, which is why US and global equities, crude oil markets, and risk-sensitive currencies were up and why the JPY has underperformed.
However, the EUR / JPY has pulled back from the highs in recent trading and is below 127.00 again, and the bulls lack the conviction to push the pair towards the 2019 highs at 127.50. A further improvement in the market’s risk appetite over the next few days could be enough to achieve this.
Such a move seems unlikely during the Asian session on Thursday. Risk appetite has taken a hit in recent trading and the JPY has recovered somewhat amid concerns about violence on the U.S. Capitol as pro-Trump protesters seek to disrupt congressional certification. the outcome of the November 2020 presidential election. The situation is likely to be brought under control soon and Congress can re-certify the elections, but the risks of further “setbacks” in the transition to the Biden administrations will be worth watching. for the next few weeks.
Currently, the EUR / JPY is trading with gains of around half a percent on the day or just under 70 pips.
EUR / JPY looking for a decisive break above 127.00
The EUR / JPY is looking for a decisive break above 127.00 that has eluded the pair multiple times since August 2020. In August 2020, the pair managed to hit highs at 127.10, before falling back to lows below 1.2200. . Since mid-December, the pair has flirted back to the 127.00 level, but despite hitting 127.20 on Wednesday, it has fallen below again. The bulls are aware of a decisive break above this level that would highlight the 2019 high of 127.50.