- The EUR/JPY pair rose to the day’s high around 124.80 prior to the European market start on Tuesday.
- Latest comments from the US President favoring a trade deal with China and weaker Japan data played their role in the increase.
- Buyers await clearance of 124.90 to aim for 125.20 while 124.35 can act as nearby support.
The Japanese Yen (Yen) weakened against the Euro to near 124.80 ahead of European session starts on Tuesday. The JPY registered losses across the board on a risk-off move after the US President signaled brighter chances of the US-China trade deal. Adding to the sentiment, Japan’s tertiary industry activity index slipped behind market consensus. The pair watchers now eye Monday’s high around 124.90 as a trigger to further upside.
Risk sentiments across global markets improved after the US President Donald Trump said in a rally addressing supporters in Texas that “We are going to make great deals on trade.” He further added that “We don’t want China to have a hard time”. Other than China, Mr. Trump also appeased concerns for North Korea by saying “`Hopefully’ will do as well on second Kim meet as first.”
At the economic front, Japan’s December month tertiary industry activity index dropped past -0.1% market consensus to the -0.3% contraction.
With Trump’s U-turn from his latest remark of not meeting the Chinese President until the trade talk’s expiry, investors rush to riskier assets than the traditional safe haven JPY. The Japanese currency got additional weakness from the domestic activity data.
Looking forward, the European market open, developments on the Brexit and US-China trade talk could continue directing near-term moves of the pair.
EUR/JPY Technical Analysis
Considering gradual recovery in 14-day relative strength index (RSI), coupled with overall risk-on moves, the EUR/JPY pair may surpass 124.90 resistance to aim for 61.8% Fibonacci retracement of its December-January downturn, at 125.20. However, 125.77-90 area, comprising early-month highs and late December lows, could limit the pair’s rise past-125.20.
Alternatively, 124.35 and 124.15 may act as immediate supports for the pair. Given the pair declines under 124.15, 124.00, 123.75 and 123.35 could reappear on sellers’ radar.