EUR/JPY trims losses and rises back above 129.00

EUR/JPY bounced sharply from 1-month lows. Markets partially reversed earlier moves with US bonds yields moving away from daily lows and USD/JPY rising back above 110.00. Still, the euro looks vulnerable against the yen. 

The Japanese currency gained momentum across the board yesterday after President Donald Trump warned North Korea with “fire and fury”. The North Korean army responded with the announcement of an examination of a plan for a strike on Guam. 

A cloudy outlook

Risk aversion boosted the yen, the Swiss franc, and gold. During the last hours, markets have remained steady, weakening the demand for the yen and sent EUR/JPY back to the upside. 

The pair rose almost a hundred pips from the lows but still appears to be facing bearish pressure. The recovery was capped (again, like during the Asian session) below 129.35. Also, price remains under a short-term uptrend line that broke earlier today. 

The euro bottomed at 128.42. The area around 128.50 is a key support. A decline under 128.80 would leave 128.50 exposed again and a consolidation below would open the doors for an extension of the slide. The next support might lie at 128.00 (July lows). 

To the upside, a rally above 129.50 would remove the short-term bearish pressure. The next resistance could be seen at 130.10 (Aug 4 low) and 130.80/85 (weekly high).