Euro dodges volatility as risk aversion permeates markets to boost Japanese yen

Euro, EUR/JPY, Japanese Yen, US Dollar, Fed, Nasdaq, Treasuries – talking points

• The euro has remained stable as the tide returns to risky assets
• Stocks, commodities and growth-related currencies have been hit hard
• Investors are looking for safe havens. What does this mean for EUR/JPY??

The Euro continues to hold its ground against a rising US Dollar and Japanese Yen as Monday’s carnage spilled over into Tuesday’s Asian session. Risk assets generally under pressure.

Wall Street is jam-packed The Nasdaq ended the US cash session down 4.29% as risk aversion and higher near-term interest rates continue to undermine technology stocks. The Hang Seng Tech Index was down over 7% at times today but has since staged a comeback.

Futures markets are pointing to a modest uptrend for the open cash market for North American equities. APAC stocks are all in trouble today.

Treasuries rallied earlier in the week as the run into higher quality assets accelerates while the exit from riskier assets gathers momentum. The reality of a shrinking Fed balance sheet alongside rate hikes becomes apparent as excess liquidity is drained.

In a true flight to safety and risk aversion, the Japanese yen was the best performing currency on Monday, defiing its recent and steady depreciation. The euro and The US dollar also appreciated elsewhere.

Commodity-related currencies of AUD, CAD, NOK and NZD wallow at multi-year lows as the entire commodity complex weakened overnight. Iron ore and nickel were hit particularly hard.

Crude oil is lower again through the Asian session and gold is relatively stable, hovering near $1,864 an ounce at press time.

Looking ahead, there will be an abundance of central bank speakers following the release of the German Zew survey. The ECB will see Nagel, Villeroy and Guindos cross the wires.

Then from the Fed comes comments from Williams, Barkin, Waller, Kaskari, Mester and Bostic. The US CPI is due on Wednesday.

The full economic calendar can be viewed here.

EUR/JPY Technical Analysis

EUR/JPY remains above an ascending trendline but appears to be at a crossroads.

The ascending trend line also shares with the 10- and 21-day simple moving averages (SMA). A move below these 3 lines could indicate that the bullish momentum is starting to fade.

If the price sustains above these lines, it could indicate that the bullish momentum is intact for now.

If it breaks on the downside, support might lie at previous lows of 135.52, 134.78 and 134.30.

On the upside, resistance might be offered at 140.00 recent high or 141.06 June 2015 high.

diagram ccreated in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel use the comments section below or @DanMcCathyFX on twitter

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