EUR/JPY: Corrective pullback from 13-day low eyes to regain 130.00, geopolitics in focus
- EUR/JPY picks up bids to consolidate losses during four-day downtrend.
- Risk appetite remains weak as the West prepares sanctions for Russia.
- European stock futures contrast US counterpart to print mild gains, Bund yield stay firmer, Bond coupons drop.
- German IFO figures, risk catalysts to provide fresh impulse.
EUR/JPY pares intraday losses around 129.75, down 0.11% during the fourth consecutive daily fall heading into Tuesday’s European session.
The cross-currency pair dropped to refresh a two-week low during the Asian session amid risk-off mood. However, mixed headlines seemed to have triggered the quote’s recent corrective pullback.
Russian President Vladimir Putin’s signing of a decree "on friendship and cooperation" with Donetsk and Luhansk of Eastern Ukraine triggered the initial rush to risk-safety in the market. Moscow’s moves pushed global policymakers to believe in the Western warnings over the Russian invasion of Kyiv.
Following that, major policymakers, mainly from the UK, the US, Canada and Japan, raised concerns on the probable sanctions over Russia if it takes military actions against Ukraine. On the same line, Reuters conveyed that the European Union (EU) sanctions package may include the key Nord Storm oil pipeline, as per Austria.
It should, however, be noted that the Russian Foreign Ministry mentioned that it stays open to talks and diplomacy, when asked about possible Lavrov-Blinken talks, which in turn might have triggered the recent consolidation in the market’s risk-aversion.
While portraying the mood, Euro Stoxx 50 rise 0.80% intraday while the S&P 500 Futures print over 1.5% daily loss at the latest. The same indecision could be witnessed while chasing yields on Bunds and Bonds as the former prints mild gains but the latter dropped six basis points by the press time.
Looking forward, German IFO sentiment data for January may entertain EUR/JPY traders but major attention will be given to the risk catalyst for clear directions.
Technical analysis
A clear downside break of the 100-DMA and 50-DMA, around 130.20-10 by the press time, directs EUR/JPY bears towards an upward sloping support line from December 20, 2021, near 128.80.