EUR/JPY firm in Asia, supported by 100-hr SMA

• EUR/JPY rallies to be contained on political risks.
• Initial resistance are the 55- and 200-day moving averages at 129.37/78.

EUR/JPY is rising in Asia, despite US stocks falling over 2% at the end of last week and is showing no ill effects from the weekend protests in France. However, concerns over slowing global growth and tariff wars, Brexit, and Italy’s budget should cap rallies on risk-off flows into the yen. The Huawei CFO Meng Wanzhou remains a risk whereby the US alleges that an unofficial subsidiary was used to circumvent US and European sanctions on Iran.

Analysts at ANZ explained that banks clearing money for Huawei were unaware that they were contravening sanctions, the charge alleges:

"The arrest has angered China, with Huawei a flagship success story at the forefront of China’s ambitions to become a high-tech superpower, more independent of the US. It will be a long, slow process before the decision is made on whether Meng should be sent to the US to stand trial. And then there could be appeals. But in the meantime, markets are assuming the resulting ratcheting up of tension between the US and China makes it less likely a trade truce will be agreed, for all that Trump tweeted over the weekend that talks were “going very well”. Semi-conductor stocks, in particular, are under pressure."

EUR/JPY levels

While supported in Asia today, so far, but the 100-hr SMA, analysts at Commerzbank explained that EUR/JPY has sold off to the 4-month support line at 127.64: "It remains under pressure and the risk remains on the downside. Further down lies the October trough at 126.64. While above here longer term scope remains on the topside. Initial resistance are the 55- and 200-day moving averages at 129.37/78. To reassert upside pressure the market will need to overcome the 130.15 7th November high."