EUR/JPY finds acceptance above 131.00, risk reversals rise

• Yen sell-off pushed EUR/JPY above 131.00, eyes 200-day MA.
• EUR/JPY risk reversals retrace EUR bearish bias.

The EUR/JPY pair seems to have found acceptance above 131.00 as the Yen nosedived on Wednesday.

Currently, the pair is trading in a sideways manner around 131.43, having clocked a high of 131.147 yesterday. The pick up from the March 23 low of 128.94 has been accompanied by a rise in the one-month 25 delta risk reversals from -1.40 to -1.07 - the highest level since Feb. 2, indicating a drop in implied volatility premium (drop in demand) for the EUR puts (sell EUR).

The improvement in the risk reversals also means the investors believe the recent rise in the EUR/JPY is here to stay and could be extended further to the 200-day moving average seen at 131.95.

Focus on the German preliminary CPI

The German preliminary CPI reading for March is expected to print at 1.7 percent year-on-year vs. Feb reading of 1.4 percent. A better-than-expected figure could strengthen the bid tone around the common currency. Meanwhile, a weak print may push the EUR/JPY cross back below 131.00. Also, risk aversion in the stocks may play a spoilsport.

EUR/JPY Technical Levels

A clear break above 131.95 (200-day MA) would open up upside towards 132.59 (50-day MA) and 133.14 (100-day MA). On the downside, failure to hold above 131.00 (psychological level) could yield a pullback to 130.58 (10-day MA) and 130.52 (March 8 low).