EUR/JPY pares intraday losses, still well offered below 129.00 mark amid risk-off

• The risk-off impulse boosted the safe-haven JPY and prompted aggressive selling around EUR/JPY.
• Russia’s invasion of Ukraine weighed on investors’ sentiment and triggered a sell-off in equities.
• The overnight hawkish remarks by the ECB officials failed to lend support to the euro or the cross.

The EUR/JPY cross recovered a few pips from the daily low and was last seen trading just below the 129.00 round-figure mark, still down around 0.85% for the day.

Russian President Vladimir Putin authorized a special military operation in Donbas and triggered a fresh wave of the global risk-aversion trade. This was evident from a sea of red in the equity markets, which, in turn, forced investors to take refuge in the safe-haven Japanese yen and prompted aggressive selling around the EUR/JPY cross.

NATO also confirmed that an official invasion of Ukraine has begun and correspondents reported that Russian forces have entered Ukraine from Crimea. The already weaker sentiment was further hit by news that Russian forces are attacking the Ukrainian border around Belarus, fueling fears about a further escalation of tensions in Eastern Europe.

German Chancellor Olaf Scholz said that the attack on Ukraine is a blatant breach of international law and that Russia must immediately cease its military action. US President Joe Biden also issued a statement and called the attack unprovoked and unjustified. Biden further added that the US and its allies will impose severe sanctions on Russia.  

The geopolitical developments dragged the EUR/JPY cross to a near four-week low and largely overshadowed the overnight hawkish comments by the European Central Bank (ECB) officials. The ECB Vice President Luis de Guindos said that we will readjust asset purchases if needed and will see when an interest rate hike can take place.

Adding to this, Governing Council member Bostjan Vasle said that the time seems right for the monetary policy to move out of crisis mode and start the process of gradual normalisation. This, however, did little to lend any support to the shared currency or ease the intraday bearish pressure surrounding the EUR/JPY cross.

Hence, the market focus remains on fresh headlines on the situation in Ukraine, which will continue to play a key role in influencing the broader market risk sentiment. This, in turn, will drive demand for traditional safe-haven assets, including the JPY, and produce some meaningful trading opportunities around the EUR/JPY cross.

Technical levels to watch