The yen seen demand in early trading yesterday on geopolitical tensions, but the safe haven has pulled back from a three-month high against the dollar. Market participants are also citing a worry that the global economic recovery is slowly materializing, which is leaving risk assets in range bound territory.
The euro against the dollar and yen remain sluggish after its rapid decline last week on quantitative easing speculation from the European Central Bank (ECB). “Growth or lack of inflation plays some role,” said Sebastian Galy, a senior FX strategist at Societe Generale.
The euro has been able to pair back some of the steep declines, but further lax monetary policy is looking like a sure thing. “We have the tools to further loosen our monetary policy,” according to ECB board member Yves Mersch. The ECB board’s next meeting is June 5, and the outcome will doubtingly become a trend changer.
In the meantime, EURJPY is modestly higher in early Asian market trade with yen futures down .23 percent. The EURUSD has been largely confined between 1.37 and 1.3730, and it is limiting movement in the yen-cross pair. EURJPY is trading off of support at 139.60, but it remains beneath a larger ascending trend line created from the yearly low of 124.95. A minor pullback is suggested in the +/- DMI, with the – DMI rolling over from the highs. The RSI has also bounced from oversold territory. A retracement to 139.70 is probable ahead of tonight’s Bank of Japan (BoJ) monetary policy, which is expected not to change from the previous month.