EURJPY continues appreciating and returns to the 147.00 area

• The euro extends recovery from lows near 144.00 to the 147.00 area.
• The Japanese yen loses ground amid a positive market mood.
• Investors are pricing in easier COVID restrictions in China. 

The euro extended gains on Monday, following a sharp recovery from the 144.00 area on Friday, with the pair approaching 147.00 on Monday’s US afternoon trading session.

The yen dives in a risk-on session

In the absence of relevant macroeconomic releases, the positive market sentiment is driving currencies on Monday. Safe-haven assets like the US dollar or the Japanese are suffering, with investors' demand shifting towards riskier assets like the euro or the British pound.

Rumors that China is considering a certain relaxation in the Zero-COVID policy is feeding optimism on Monday. Equity markets have extended their rally, overlooking the denial from the Chinese authorities, that have warned about the possibility of severe restrictions ahead, as the winter flu season approaches.

In the European calendar, the Eurozone Sentix Survey has shown the first improvement in investor sentiment over the last three months. The warmer temperatures in Europe are easing previous fears about gas rationings and allowing moderate declines in energy prices.

Beyond that, the positive Non-Farm Payrolls data seen on Friday continues acting as a tailwind for risk appetite. The tight US labor market conditions add reasons to the Federal Reserve to maintain an aggressive tightening path and a positive policy differential with the Bank of Japan that has pulled the yen nearly 30% lower against the USD, and about 15% down against the euro so far this year.

Technical levels to watch