Still Heavy

EUR/JPY has extended losses in Tokyo trade after yesterday's breach of the 50-DMA and the key Aug 10/11 lows generated an important bearish signal. A poor showing from e-minis has helped bolster the yen, while the BoJ's monetary policy decision has been ignored, with no major deviations from market expectations noted there.

• The rate last deals -53 pips at Y123.47, just above a seven-week low printed earlier in the session. The 50% retracement of the Jun 22 - Sep 1 rally at Y123.19 provides the initial bearish target. Coming up next is the lower 2.0% 10-DMA envelope at Y122.55. On the topside, a break above Sep 15 high of Y125.77 would give bulls the green light for targeting Sep 10 high of Y126.46.
• ECB's Weidmann warned that a full recovery from the coronavirus crisis will take years, even as "things are looking up". Weidmann expressed "fundamental scepticism" about extensive government purchases and said that the ECB's emergency measures rolled out in the midst of the pandemic will have to be pared back once the crisis is over.
• On the political front, EU Commission Pres von der Leyen delivered her State of the Union Address to the European Parliament. The President appeared to challenge her former boss, German Cll'r Merkel, as she pointed to a dangerous pattern in Russian activity including the poisoning of dissident Alexey Navalny and noted that "no pipeline will change that", in reference to the Nord Stream 2 project.
• Final Eurozone's CPI data comes out later today, while regional central bank speaker slate features ECB's Rehn, Muller and de Guindos.