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Sentiment on EUR/JPY has shifted towards negative over the last couple of weeks, so this latest bounce could be another opportunity to play the downside momentum.

Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a retracement play on USD/JPY, so be sure to check that out to see if there is still a potential play!

Intermarket Update:

Equity Markets Bond Yields Commodities & Crypto
DAX: 14817.72 +0.47%
FTSE: 6736.17 -0.07%
S&P 500: 3971.09 -0.9%
NASDAQ: 13059.65 -0.60%
US 10-YR: 1.71%  +0.05
Bund 10-YR: -0.31% +0.009
UK 10-YR: 0.783% -0.006
JPN 10-YR: 0.067% -0.01
Oil: 61.57 +0.98%
Gold: 1,712.00 -1.30%
Bitcoin: 57,489.25 +3.14%
Ethereum: 1,806.75 +7.29%

Fresh Market Headlines & Economic Data:

Global shares slide after hedge fund’s default

Fed will not keep interest rates low for government’s benefit, Waller says

CDC will extend national eviction ban through June 30

Texax Manufacturing Survey surged 28 points to 48.0, its highest reading in the survey’s 17-year history.

BoE’s Vlieghe says economy will need help even with swift rebound

UK mortgage approvals for February surge 20%

Traffic in Suez Canal resumes after stranded ship refloated

Oil rises as traders expect OPEC+ to hold output cuts

Upcoming Potential Catalysts on the Economic Calendar

New Zealand Building Consents at 9:45 pm GMT
Japan Unemployment Rate at 11:30 pm GMT
Japan Retail Sales at 11:50 pm GMT
German Import prices at 6:00 am GMT (Mar. 30)
France Consumer confidence at 6:45 am GMT (Mar. 30)
Spain at Inflation Rate, Retail Sales at 7:00 am GMT (Mar. 30)
Swiss Economic Barometer at 7:00 am GMT (Mar. 30)
Italy PPI at 8:00 am GMT (Mar. 30)
Euro area Economic sentiment, Consumer confidence at 9:00 am GMT (Mar. 30)
German Inflation Rate at 12:00 pm GMT (Mar. 30)

What to Watch: EUR/JPY

EUR/JPY 1-Hour Forex Chart
EUR/JPY 1-Hour Forex Chart

With broad risk sentiment moving negative thanks to rising covid cases and hedge fund liquidations, it makes sense to turn to the Japanese yen for potential bullish direction as traders get more risk averse. And we’re not too big on the euro either as Europe is back in lockdown after a mishandled vaccine rollout.

We don’t have major catalysts schedule for the Tuesday session, which makes a continuation of the risk aversion sentiment a possibility, especially if covid related headlines continue to as negative as the CDC’s latest statement today (U.S. headed for ‘impending doom’ as Covid cases rise again).

If bearish sentiment does continue, it’s likely the yen will outperform the euro in the short-term, and traders should watch for a break in the rising lows on EUR/JPY. If so, technical and fundamental traders may jump back into the recent downtrend, assuming no fresh, unexpected catalysts appear to shift traders’ focus.

This could lead to a momentum move to the downside, with support to likely be found at the previous swing lows (around the 128.50 handle), which is reachable within a session or two given the daily ATR of around 70 pips.