EUR/JPY Close to Over Three-Year Low Level of 121.00
The EUR/JPY cross seems to digest its Thursday's sharp fall and is now trending lower for fourth consecutive day to currently trade just shy of over three-year low level of 121.00 touched yesterday.
On Thursday, ECB left its monetary policy unchanged and revised its economic and inflation forecast for 2016 with an attached warning of downside risk to the projections. The shared currency weakened across the board as the ECB's updated inflation projection remained well below the central bank's 2% target, suggesting that the European Central Bank might ease its monetary policy and push interest-rates deeper into negative territory.
Meanwhile, the Japanese currency continued with its up-surge on global risk-aversion and got a further boost after Bank of Japan board member, Takehiro Sato, criticized BoJ's negative interest-rate policy and said that the central bank should go slow in trying to achieve its 2% inflation target. The comments reduced expectations of further stimulus from the Japanese central bank and boosted the Japanese Yen.
The combination of developments sent the EUR/JPY cross tumbling lower to its lowest level since March 2013. The pair did register a tepid recovery it previous multi-year lows support, now turned resistance near 121.65-70 area.
Technical levels to watch
From current levels, attempts of recovery could materialize only once the pair moves back above 121.65-70 resistance, above which the pair could stage a minor recovery towards 122.00 handle. Momentum above 122.00 handle might now be restricted at 122.50 level, which now seems to cap any further near-term recovery for the pair.
On the flip side, weakness below 121.00 level would confirm the pair's vulnerability to extend its near-term slide towards testing its next major support near 119.00 level, with 120.00 psychological mark acting as intermediate support.