EUR/JPY seesaws near six-week top below 126.00 as EU summit continues

• EUR/JPY fades upside momentum from 122.79.
• EU leaders take another break to resume the battle over Euro 750 billion plan.
• BOJ minutes struck upbeat tone, Japan trade numbers dwindle.
• German catalysts may offer intermediate moves with major attention on risk factors.

EUR/JPY recedes further from June 08 top to 122.56, up 0.20% on a day, during Monday’s Asian session. The pair’s latest weakness takes clues from the fading optimism concerning the European Union (EU) summit. However, downbeat Japanese data and mixed risk catalysts keep the bulls hopeful.

The EU policymakers extend the weekend summit to the early hours of the morning as talks over the recovery funds fail to offer any decision. Despite Denmark’s shift in favor of 400 billion Euros of grants, nations like Netherland and Austria continue to drag the negotiations. As a result, European Central Bank President Christine Lagarde backed an ambitious EU agreement and not the quick one.

On the other hand, minutes of the latest BOJ meeting suggest that the policymakers cite abating economic risks due to the heavy monetary/fiscal support. However, fears of the coronavirus (COVID-19) keep the broad outlook uncertain. Furthermore, Japan’s trade numbers for June suggest a decline in the headline Merchandise Trade Balance and Exports but the Imports have recovered.

Market’s risk-tone sentiment remains sluggish amid fears of a double-dip recession in the US, cited by the Financial Times (FT). Additionally, no agreement at the EU summit and a surge in the pandemic figures from the US and Australia also portray the risk-off mood. As a result, the US 10-year Treasury yields remain sluggish around 0.62% while S&P 500 Futures and stocks in Asia-Pacific print mild losses by the press time.

In addition to keeping eyes on the EU summit, traders may also watch over the German Producer Price Index (PPI) data for June, coupled with monthly Buba report for fresh impetus.

Technical analysis

Resistance line of a monthly ascending trend channel, currently near 122.60, becomes necessary for the bulls to tackle if they aim for June month’s top close to 124.45. On the downside, sellers are waiting for a clear break below 122.00 to attack the 120.00 threshold.

Reprinted from FX Street. The copyright all reserved by the original author.

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