- EUR/JPY clings to 21-DMA after four consecutive days of losses.
- Trade-backed risk-on welcomes Japanese traders after an extended weekend.
- Geopolitical plays, fundamental pessimism at the EU exert downside pressure.
Even if the pessimism surrounding the Eurozone economy prevails, the EUR/JPY pair refrains from further declines as it trades around 118.20 during early Tuesday.
The return of the Japanese traders from an extended weekend got a warm welcome from the US President Donald Trump and the Treasury Secretary Steve Mnuchin. Both the US diplomats painted a rosy picture of the US-China trade sentiment while signaling trade talk resumption in two weeks’ time.
Adding to the Japanese Yen (JPY) weakness was Japan’s Preliminary reading of Jibuyn Bank Manufacturing Purchasing Managers’ Index (PMI) that lagged below 49.3 prior to 48.9.
Markets reacted positively to the news with the US Treasury yields taking back some of the latest losses while Asian equities also flashing green signals during the early-day trading.
The pair has been on a downward trajectory since last four days with the recently dovish testimony from the European Central Bank (ECB) President Mario Draghi acting as the latest catalysts. Also supporting the bears are the downbeat activity numbers from Germany and Eurozone.
Elsewhere, the EU-UK Brexit drama continues as leaders of both the economies failed to provide any breakthrough during the Brexit talks at the United Nations General Assembly in New York. Furthermore, Iran’s dismissal of the global push to respect the 2015 Nuclear Deal, by citing a lack of adherence from the EU members, also adds to the political uncertainty surrounding the currency bloc.
German IFO numbers and speech from the ECB’s policymaker Luis De Guindos will be in the spotlight for now.
Technical Analysis
While 117.60/50 acts as the near-term key support, pair’s upside beyond 50-day simple moving average (SMA) level of 118.85 can question monthly top nearing 120.00 round-figure.
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