Risk appetite took a turn for the worse during US trading hours on Wednesday, forcing EUR/JPY to hand back early session gains that took it as high as the 130.70 mark. The pair has since dropped back to the 130.00 area, where it now trades with losses of 0.2% on the day versus the 0.3% gains it was trading with at session highs.
Market commentators citing the rising risk of a Russian military incursion into Ukraine as the major reason for the downturn in sentiment during US trade. Reports suggesting US intelligence had warned Ukraine of Russian plans to invade within 48 hours and Ukraine has just approved a state of emergency and urged its citizens to flee Russia.
Despite choppy, two-way trade on Wednesday that saw EUR/JPY swing within a more than 70 pip range, the day’s volatility has remained easily contained within Tuesday’s 129.40-130.80ish ranges. Indeed, as market participants continue to monitor the unpredictable geopolitical landscape and react to developments headline by headline, trading conditions are likely to remain choppy and difficult.
To the downside, weekly lows in around 129.40 is the major support to watch and below that is the long-term uptrend from November 2020. Given the ECB’s ongoing hawkish shift towards admitting that it will tighten in Q4 this year (see ECB’s Philip Lanes comments on Wednesday), a longer-term move under 129.00 seems unlikely.
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