EUR/JPY: Saved by the bell at 121.20 low, still plenty downside risk

Currently, EUR/JPY is trading at 122.15, down -0.04% from yesterday's volatile trading day, having posted a daily high at 122.61 and low at 121.24.

Volatility Peaks; Risk-on turns off Risk-off

Crosses tend to deliver a high-risk trading experience when volatility peaks, however, that was not the case on this opportunity for the EUR/JPY. There is a deteriorated fundamental background that serves as an invisible wall to market participants; therefore there is no need to risk the house if you are getting back pennies. 

At these levels, 180 pips from the next immediate resistance, there are only two logical solutions: neutral or bearish. A bullish stand, adds to much risk in a formula where further euro weakness is expected. 

The European Union, like many other regions in the world, faces grand political challenges from migration reforms, the ongoing Brexit drama, a banking time bomb in Italy, a few rebels among its line (Bavaria, Catalunya, France) and soon joining the wolf pack; chaos in Germany. 

Political risk continues to override fundamentals

EUR/JPY Technical Levels

To the upside, only an open and close 123.70/80 would open doors for more upside. For now, the support zone 121.20/00 saved the day; Is it going to last?

On the long-term view, a deeper pullback makes sense to provide a better entry to buyers. There is evidence to allocate long entries near 118.90 (long-term 23.6% Fib) and 118.50 (short-term 61.8% Fib). If prices were to slide lower due to a massive euro sell-off, then 116.80 (short-term 50.0% Fib) would not be out of the question.

EURJPY wave (4) pullback nearing completion