Euro Swerves Volatility as Risk Aversion Permeates Markets to Boost Japanese Yen

EURJPY CHART


Euro, EUR/JPY, Japanese Yen, US Dollar, Fed, Nasdaq, Treasuries – Talking Points

  • The Euro has been steady as the tide goes out on risk assets
  • Equities, commodities and growth-related currencies have been hit hard
  • Investors are seeking out safe havens. What does this mean for EUR/JPY?

The Euro continues to hold ground against a surging US Dollar and Japanese Yen as the carnage from Monday has spilled over into the Tuesday Asian session. Risk assets under pressure across the board.

Wall Street tanked with the Nasdaq finishing the US cash session down 4.29% as risk aversion and higher short-term rates continue to undermine tech stocks. The Hang Seng Tech index was down over 7% at one stage today but has managed a come-back since.

Futures markets are pointing a slight uptick for the North American equity cash market open. APAC equities are all struggling today.

Treasuries have rallied to start the week as the run to higher quality investments picks up steam, while the exit from riskier assets gathers pace. The reality of a shrinking Fed balance sheet alongside rate hikes is becoming apparent as excess liquidity is withdrawn.

In a true bout of a flight to safety and risk aversion, the Japanese Yen was the best performing currency on Monday, defying its recent and consistent depreciation. The Euro and US Dollar also gained elsewhere.

Commodity related currencies of AUD, CAD, NOK and NZD are wallowing at multi-year lows as the entire commodity complex weakened overnight. Iron ore and nickel were hit particularly hard.

Crude oil is lower again through the Asian session and gold is relatively steady, near US$ 1,864 an ounce at the time of going to print.

Looking ahead, after the German Zew survey is released, there will be a plethora of central bank speakers. The ECB will see Nagel, Villeroy and Guindos crossing the wires.

Then from the Fed, there will be comments from Williams, Barkin, Waller, Kaskari, Mester and Bostic. US CPI is due Wednesday.

The full economic calendar can be viewed here.

EUR/JPY Technical Analysis

EUR/JPY remains above an ascending trend line but appears to be at a crossroads.

The ascending trend line also dissects with the 10- and 21-day simple moving averages (SMA). A move below these 3 lines could indicate that bullish momentum has begun to fade.

If the price remains above these lines, it may suggest that bullish momentum is intact for now.

If it were to break lower, support could be at the prior lows of 135.52, 134.78 and 134.30.

On the topside, resistance might be offered at the recent peak at 140.00 or the June 2015 high of 141.06.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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