EUR JPY drops to new three year low within long term downtrend
EUR/JPY dropped to a new three-year low of 120.30 early on Thursday, dipping slightly below its previous long-term low that was hit late last week, before paring its losses by the afternoon. Helping to drive the currency pair lower on Thursday was a general risk-off sentiment during the earlier part of the day that prompted the safe haven yen to gain favor.
From a longer-term perspective, the yen has been in strengthening mode against other major currencies since late last year, despite Japan’s hopes and efforts to weaken its currency. At the same time, the euro has felt some pressure due to a number of factors, including concerns over the economies and banks in the euro area as well as a persistently dovish European Central Bank that has recently been on the constant verge of instituting further easing measures.
Another very important factor that has and could potentially continue to weigh on EUR/JPY is the risk surrounding the UK’s EU referendum that will be held two weeks from now. During this referendum, UK voters will decide whether the country remains within the European Union or leaves it (popularly referred to as "Brexit"). Although more attention has been paid to the potentially far-reaching effects of a Brexit on the British pound and UK equity markets, euro area markets and the euro currency should also be significantly affected by both the speculative risk preceding the upcoming referendum and its actual outcome.
To make matters potentially even worse for EUR/JPY, both this risk and outcome are quite likely to promote general market turmoil, in which case risk aversion could further permeate market sentiment and lead to more buying of the safe haven yen.
From a technical perspective, the EUR/JPY’s bearish trend bias has been playing out for at least a year. This bearishness has been clearly outlined by a downtrend line beginning in August of last year that began to accelerate into an even more sharply-angled downtrend beginning in late January. Additionally, both the key 200-day and 50-day moving averages are clearly sloped rather steeply to the downside. Most recently, the clear succession of lower highs and lower lows broke down below key support around the 122.00 area late last week. With sustained trading below this 122.00 level, EUR/JPY could continue to move lower in the run-up to the EU referendum and, depending on the outcome, also after the votes are counted and the results are released. The next major downside targets on such a move are at the 119.00 and then 116.00 support levels.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Contracts for Difference (CFDs) are not available to US residents.
FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.
Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.
© FOREX.COM 2025