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FOREX: EURJPY Sells Off Sharply on Lower Equities and Yields

FOREX
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  • Lower US yields initially contributed to a lower greenback on Monday, with the likes of EURUSD and GBPUSD trading with a strong bid across the European morning. However, sharp weakness for equities abruptly altered the sentiment in currency markets, with the dollar paring losses and the Japanese yen then notably outperforming.
  • This was best evidenced by the significant weakness for EURJPY (-0.80%), which fell around 200 pips from session highs to print a low of 162.82. Initial firm support for the cross lies at 162.34, the 20-day EMA and for now, the pullback is considered technically corrective with potential month/year end flow dynamics potentially contributing.
  • For EURUSD, a session low of 1.0372 keeps bearish conditions firmly in play. The trend condition continues to highlight scope for a test of key support at 1.0335, the Nov 22 low and a bear trigger.
  • The Swiss Franc was less interested by today’s moves across equity/bond markets, and notably USDCHF rose to fresh post-election highs of 0.9074, also representing the highest level for the pair since May. Above here, the year’s best level at 0.9224 remains the most obvious target should the trend continue.
  • In emerging markets, USDMXN stands out having risen 1.5% to trade at a one-month high. Resistance to watch remains at 20.8313, the Nov 26 high, and a breach of this hurdle would confirm a resumption of the uptrend. In contrast, the Brazilian real trades higher on the session, with the central bank stepping in once more, auctioning 1.8 billion in the spot market to curtail the BRL weakness.
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  • Lower US yields initially contributed to a lower greenback on Monday, with the likes of EURUSD and GBPUSD trading with a strong bid across the European morning. However, sharp weakness for equities abruptly altered the sentiment in currency markets, with the dollar paring losses and the Japanese yen then notably outperforming.
  • This was best evidenced by the significant weakness for EURJPY (-0.80%), which fell around 200 pips from session highs to print a low of 162.82. Initial firm support for the cross lies at 162.34, the 20-day EMA and for now, the pullback is considered technically corrective with potential month/year end flow dynamics potentially contributing.
  • For EURUSD, a session low of 1.0372 keeps bearish conditions firmly in play. The trend condition continues to highlight scope for a test of key support at 1.0335, the Nov 22 low and a bear trigger.
  • The Swiss Franc was less interested by today’s moves across equity/bond markets, and notably USDCHF rose to fresh post-election highs of 0.9074, also representing the highest level for the pair since May. Above here, the year’s best level at 0.9224 remains the most obvious target should the trend continue.
  • In emerging markets, USDMXN stands out having risen 1.5% to trade at a one-month high. Resistance to watch remains at 20.8313, the Nov 26 high, and a breach of this hurdle would confirm a resumption of the uptrend. In contrast, the Brazilian real trades higher on the session, with the central bank stepping in once more, auctioning 1.8 billion in the spot market to curtail the BRL weakness.