FX

EUR/JPY tracks US Treasury yield rebound to regain 129.00

  • EUR/JPY keeps bounce off four-month low, refreshes intraday high.
  • US 10-year Treasury yields consolidate the heaviest daily loss since November.
  • US stimulus headlines jostle with mixed updates over Delta covid variant amid subdued markets.
  • Japan’s National Core CPI jumps the most since March 2020 on YOY.

EUR/JPY picks up bids to 129.20, near the lowest since late March, amid early Tuesday. The pair seems to track the US Treasury yields to portray a corrective pullback from a multi-day low.

The US 10-year Treasury yields added 2.8 basis points (bps) to 1.209% by the press time. In doing so, the risk barometer bounces off a five-month low amid mixed concerns.

While positives surrounding the US stimulus could have favored the bulls to take a risky entry, the coronavirus woes and US-China tussles seem to weigh on the mood. The news of one billion Pfizer jabs every week for Australia, per Aussie Health Minister Greg Hunt’s tweet, as well as comments of Australian Epidemiologist Catherine Bennett, per the ABC News, signaling Victorian health authorities have the state’s COVID-19 outbreak under control, seem to have favored profit booking moves.

That said, US Senate Majority Leader Chuck Schumer said, “Procedural vote on infrastructure bill will take place on Wednesday,” giving the much-needed relief to the markets even as he also said, “Wednesday not a deadline for every detail of the bill.”

It’s worth mentioning that a fresh seven-day lockdown in South Australia, as well as an extended activity restriction period of a week for Victoria, keeps EUR/JPY sellers hopeful. Furthermore, the US travel advisory for the UK, raising the alert level to 4, as well as the White House allegations on China for the recent cyber attack, also weigh on the market sentiment and favor the pair bears.

On the data side, Japan’s National Consumer Price Index (CPI) reversed -0.1% previous with a +0.2% figure. Further, the Core CPI also jumped to 0.2%, marking the heaviest run-up in 16 months.

Amid these plays, S&P 500 Futures gain half a percent and stocks in Asia-Pacific also print mild gains by the press time.

Moving on, EUR/JPY traders may take intermediate clues from the ECB Bank Lending Survey but major attention will be given to the risk catalysts, mainly relating to the covid, China and US stimulus.

Technical analysis

Although lows marked during April and early July guard short-term EUR/JPY upside around 129.60-65, 200-DMA around 128.40, followed by March’s low near 128.30, become tough nuts to crack for the pair bears.

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