EUR / JPY rises and reaches 2021 highs beyond 133.00

• EUR / JPY extends the upside above 133.00.
• The dollar remains on the defensive in the face of falling yields.
• The advanced GDP of the first quarter of the EMU contracted 0.6% quarter-on-quarter and 1.8% year-on-year.

The increasing sell bias in the dollar gives an additional advantage to the bullish momentum in the single currency and raises the EUR/JPY to new 2021 highs past 133.00 on Tuesday.

EUR / JPY rises on growing risk appetite

EUR / JPY quickly leaves Monday’s unfinished price action behind and resumes rally to levels further north of the 133.00 barrier, the area last seen in April 2018.

Investors continue to favor riskier assets and bolster the dollar sell-off after FOMC officials dismissed recent bouts of higher inflation, reiterating once again that occasional bouts of strength in consumer prices are seen as transitory.

While US yields are mostly trading within a range theme, the dollar takes the brunt of those comments and dragged the US dollar index (DXY) to fresh 3-month lows on the region below 90.00.

On the agenda, the second review of first quarter GDP in the broader euro zone showed the economy is expected to contract 0.6% qoq and 1.8% over the last twelve months. Other data reduced the trade surplus to 15.8 billion euros in March.

In the US data space, home construction contracted 9.5% from the previous month in April and building permits expanded 0.3% month-on-month.

Technical levels

So far, the cross is gaining 0.31% to 133.06 and a breakout of 133.17 (May 18 high) would pave the way for a test of 133.48 (April 2018 monthly high) and then 134.00 (round level). On the downside, the next support at 131.64 (May 12 weekly low) was followed by 130.98 (May 5 monthly low) and finally 130.53 (50-day SMA).