EUR/JPY sinks to 4-month lows near 129.00

• EUR/JPY trades well on the defensive near 129.00.
• Dollar, yen strength drags the cross to multi-month lows.
• Next support of relevance comes in at 128.30.

The buying pressure in the Japanese safe haven coupled with solid demand for the greenback forces EUR/JPY to drop further and record new 4-month lows near 129.00.

EUR/JPY trades closer to the 200-day SMA

EUR/JPY intensifies the downside and sheds ground for the fourth consecutive week so far on Monday.

In fact, the cross moves to levels last seen in late March in the vicinity of 129.00 the figure, all within the broader downtrend sparked soon after YTD highs past 134.00 the figure recorded back in June.

The firm note on both the Japanese safe haven and the dollar against the backdrop of persistent risk aversion and lower US yields collaborate to drag EUR/JPY lower and open the door to a potential re-test of the critical 200-day SMA near 128.30. Below the latter, the outlook for the cross is expected to shift to bearish (from constructive).

In the meantime, investors are expected to gradually lean towards a more cautious mood in light of the ECB meeting due on Thursday. So far, consensus sees the central bank reiterating or even enhancing its dovish message, which should put the euro under extra pressure at least in the sessions prior to the event.

EUR/JPY relevant levels

So far, the cross is retreating 0.71% at 128.97 and faces immediate support at 128.54 (61.8% Fibo of the January-June rally) followed by 128.32 (200-day SMA) and then 128.29 (monthly low Mar.24). On the other hand, a surpass of 131.08 (weekly high Jul.13) would aim for 132.43 (monthly high Jul.1) and finally 132.69 (weekly high Jun.23).