The pair climbs to a high of 130.47 on the day
Sellers remain in control for the time being, as the pair still trades under the 200-day MA (blue line) but it’s a decent recovery from the lows posted earlier in the Asian session so far.
This is one pair that is going to be interesting to watch today and tomorrow. First thing’s first, option expiries for EUR/USD is going to be something to look out for. There is a large one sitting at 1.2200 today, so that may cause the euro to be a bit sticky at current levels until after the cut.
But more importantly, the pair is a trade on risk sentiment this week. The yen gained yesterday (mainly in the US session) as stocks continued its tumble following Powell’s speech on Tuesday. We have round two of that later on, but I expect a duller take this time around as he is testifying before the senate banking committee.
So, US stocks will be the one to watch for on the yen side of the equation. Right now, S&P 500 futures have recovered off the lows for the day but you can’t discount a further drop in equities so early on in the day just yet.
On the other side of the equation, the euro is heading into weekend filled with risk events on the political front. There is the Italian election in which the outcome is still uncertain, and there’s also the German SPD party postal vote count – on whether or not they would support a coalition deal.
The market is playing out as though those two events are passable that it feels like it’s a non-event, but nothing is certain just yet. In such a event, there could be some position squaring and money being taken off the table (if not already) on euro longs before the weekend, so that is something to look out for.
The technical hurdle and both sides of the risk equations point to a lower EUR/JPY, but considering the market is largely ignoring the risks on Italy and Germany, risk sentiment from stocks is the pick for me in looking at the pair right now.