The risk-off tone in trading overnight sees EUR/JPY upward trendline from August last year give way
How quickly things can change compared to two days ago. I was wrong in saying that sentiment should improve, and certainly did not account for the BOE risk event in the pair - but the overarching theme that did still drive the pair's movement over the last two days was in fact, sentiment.
And with bond yields rising after the BOE comments yesterday, it gave equities a tough time and that impacted risk sentiment and in turn sent EUR/JPY lower on the day. It broke below the upward trendline that started from August last year, and that's not a good sign for buyers at all.
So, what's next?
The pair fell to a low of 132.94 in overnight trading, but has since bounced back. Buyers appear to have found some support levels to lean on, at the 11 January low just above 133.00. And that's the level that has been holding up in trading today as well.
The upside for today has stalled at 133.75, which coincides with the 100-day MA in the daily chart above.
Anyway, sellers remain in control of the pair and if risk sentiment in Europe turns sour as well, it's going to start turning currency traders back to risk-off trading again surely. And if the 11 January support gives way, it's going to be a painful slide down for the bulls.
Once again, it will still be all about sentiment.