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12 Feb 2020

EUR/JPY remains shy of 120.00 amid cautious optimism

  • EUR/JPY questions recovery gains from Tuesday.
  • Risk-reset helps ignore ECB’s Lagarde’s downbeat statements.
  • Recent trade-related headlines question the bounce from a three-month low.
  • Japan open, Eurozone Industrial Production will provide fresh impulse.

EUR/JPY stays mildly weak while taking rounds to 119.85 during Wednesday’s Asian session. The pair recently benefited from the receding market fears of coronavirus, which in turn helped it pay a little heed to downbeat statements from the ECB’s President Christine Lagarde.

The diminishing rate of fresh coronavirus infections from the epicenter Hubei, coupled with China’s efforts to placate traders, keep the latest risk-tone positive. As per the Chinese Health Commission, Hubei registered fresh 1,638 cases by the end of February 11 versus 2,097 registered the previous day.

China continues its liquidity infusion with the latest round of 100 billion Chinese yuan on Tuesday totaling around 380 billion injections so far since returning from the Lunar New Year break.

Even so, the latest comments from the US Trade Representatives (USTR) shows US President Donald Trump’s sustained less likelihood for the World Trade Organization (WTO) and readiness to take measures to safeguard the US customers. The same indicates the risk of US-China trade deal failure amid the national security adviser Robert O'Brien’s comments that coronavirus could have an impact on the phase-one deal.

That said, the US 10-year treasury yields register 1.2 basis points (bps) of gains while the S&P 500 Futures rise 0.05% to 3,360 by the press time. It should be noted that Japanese markets were off on Tuesday.

On Tuesday, the ECB President Lagarde cited fears of low inflation following the earlier signals that the central bank has fewer options left if the situations worsen.

Moving on, December month Eurozone industrial production is expected to decline -1.6% MoM and -2.3% YoY versus +0.2% and -1.5% respective priors. This could weigh on the pair considering the latest challenges to the Eurozone. However, the market’s risk sentiment, mainly driven by Chinese headlines, will be more important to follow for near-term direction.

Technical Analysis

The pair needs to provide a daily closing beyond 120.50/55 area including 100/200-day SMA to aim for the monthly high near 121.15, failure to do so can keep dragging it towards November 2019 low near 119.20.

 

Feb 12, 2020

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EUR/USD defended 1.09 on Tuesday, but the bulls are not out of the woods yet, as a key average hurdle is still intact. The 10-candle moving average (M
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