EUR/JPY rebounds from lows near 128.20, looks to FOMC

• EUR/JPY regains some composure and bounces off 128.20.
• EMU’s final July CPI came in at 2.2% YoY, Core CPI at 0.7% YoY.
• Investors remain cautious ahead of the FOMC Minutes.

The softer tone in the greenback in combination with the prevailing selling pressure in the Japanese currency motivates EUR/JPY to rebound from earlier lows in the 128.20 area.

EUR/JPY now looks to FOMC

EUR/JPY manages to regain the smile after four consecutive daily pullbacks, including the breakdown of the always-relevant 200-day SMA, today just above 129.00 the figure.

The investors’ preference for the safe havens triggered a moderate correction lower in the cross since Monday, breaking below the consolidative theme in place since mid-July and re-visiting levels last seen in early March at the same time.

The upside bias in the Japanese yen comes in response to the improvement in yields of the key US 10-year benchmark to the vicinity of the 1.28% level so far.

In the data space, the Japanese trade surplus widened to ¥441 billion in July and Machinery Orders expanded 18.6% on a year to June. Closer to home, the final CPI in Euroland rose 2.2% YoY in July and 0.7% excluding food and energy costs, both prints falling in line with the preliminary data.

Later in the NA session, all the attention is expected to be on the release of the FOMC Minutes, where market participants will look for details on any discussion of the timing of QE tapering.

EUR/JPY relevant levels

So far, the cross is gaining 0.28% at 128.63 and a surpass of 129.01 (200-day SMA) would expose 130.01 (high Aug.5) and then 130.56 (weekly high Jul.29). On the downside, the next support comes in at 128.22 (monthly low Aug.18) followed by 128.29 (low Mar.24) and finally 127.02 (78.6% Fibo of the March-June rally).