EURJPY: Pressured by Triple-Threat of Stocks, Economy, and Virus
The EURJPY continues to fall and the pair is under threat from a triple-threat of issues, with struggling stocks, a flat economy, and rising virus cases. The JPY has long been used as a safe haven currency against stock market risk and the EURJPY pair topped with the September 2nd top in the S$P500, with the stock market down 10% since that date.
The next issue for the pair is sluggishness in the Eurozone economy with inflation running at negative and new releases underwhelming. Yesterday raised alarm bells with a drop in services. IHS Markit’s Purchasing Managers’ Index fell to 50.1 in September, which was lower than August’s 51.9. This was just higher than the key 50 level, which separates growth and contraction.
This week sees a surge in virus cases around Europe with France tightening restrictions on bars and restaurants in Marsellie, while Germany has added 11 regions to the list of COVID risk areas, as the second wave of infections spreads across Europe. The risk of a full-blown lockdown is a real threat to the European economy and all of these risks combine for strength in the Yen.
Japan reported no new cases today, while in Europe, the Netherlands alone has listed 2,500. This situation could escalate and continue to heap pressure on the Euro currency.
EURJPY Technical Outlook
The EURJPY is under pressure after the break of support at the 124.50 level. There was another level at 123.20, which has also failed to hold and this threatens a further drop towards the 120.00 level. The 123.00 will be the first resistance for the pair to try and repair the recent damage. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.