EUR/JPY drops to daily lows, approaches 133.00

• EUR/JPY loses further ground and looks to test 133.00.
• The yen remains bid and weighs on the cross on Wednesday.
• The FOMC meeting will be the salient event later in the session.

Further buying interest in the Japanese yen forces EUR/JPY to recede to the area of new 2-day lows near the 133.00 yardstick.

EUR/JPY looks to the FOMC meeting

After two consecutive sessions closing with gains, EUR/JPY meets some selling pressure on the back of the renewed demand for the safe haven yen.

Steady US yields coupled with the consolidative mood around the dollar and the European currency and rising cautiousness ahead of the FOMC event appear to have been lending fresh support to JPY, putting the cross under extra downside pressure at the same time.

In the calendar, Japanese trade deficit shrank to ¥187.1 billion in May, while Machinery Orders expanded 6.5% on a year to April. In the US, Building Permits contracted at a monthly 3% during last month (1.681M units) and Housing Starts expanded 3.6% from a month earlier (1.572M units).

Later, the Federal Reserve is seen sticking to the view that the recent pick-up in inflation is expected to be temporary, while the general tone is forecast to fall on the dovish side. Investors, however, will closely follow the updated “dots plots” and the Committee’s assessment on the economy.

EUR/JPY relevant levels

So far, the cross is losing 0.22% at 133.13 and faces the next support at 132.64 (monthly low Jun.14) followed by 132.52 (weekly low May 24) and finally 131.64 (weekly low May 12). On the upside, a surpass of 134.12 (2021 high Jun.1) would pave the way for a test of 134.40 (monthly high Sep.2017) and then 134.50 (monthly high Oct.2017).