EUR/JPY: Downside stalls with price testing 10-4hr SMA

• EUR/JPY capped at the 38.2% fibo of 2018 decline.
• EUR/JPY has pulled back towards the 10-4hr SMA as the Feb slide stalls in no man's land. 

EUR/JPY has been tracking the performance of global stocks and the ebbs and flows of the market's risk appetite subject to global growth and trade talk outlooks. On Friday, the sentiment had switched to negative in Asia and European markets, weighing on the cross which was unable to capitalise in North America when stocks made a recovery into the close. 

ECB outlook weighs

The cross has been unable to rally due to a loss of momentum in the euro area which is weighing on sentiment with respect to the ECB seen holding rates at current levels for longer. "The euro area economy has lost some momentum and that could prompt the ECB to extend their guidance on how long interest rates will remain at current levels. Even if they opt to leave forward guidance unchanged, risks around our forecast for hikes in H2/19 is skewed to a later start," analysts at RBC argued. 

Meanwhile, the week ahead lacks domestic data although Brexit will be on the cards during the Brexit vote over the 13th and 14th. "We see risks slightly skewed to the downside, even to our call: the BoE forecast is 1.8% y/y, and they're rarely wrong forecasting a release just one week out. Annual revisions to the CPI weights inject some additional uncertainty into this month's release," analysts at TD Securities explained.

EUR/JPY levels

Analysts at Commerzbank explained that EUR/JPY continues to show signs of failure ahead of the 126.42 resistance line: "It has eroded the near term uptrend and in doing so leaves the market vulnerable to further losses towards the 123.40 mid-January low. In early January the market saw a major spike lower that eroded the 2012-2019 support line at 119.31 – the low was made at 117.845. The move looks exhaustive and the market is consolidating."