EUR/JPY correction running out of steam around 200 4hr SMA?

• EUR/JPY holding key support area in the main of 134.02.
• EUR/JPY bulls looking for vol to stablise and a better performance on Wall Street. 

EUR/JPY is consolidating the bid in the yen that has picked dup safe-haven demand in recent sessions. Currently, EUR/JPY is trading at 135.21, down -0.08% on the day, having posted a daily high at 135.82 and low at 133.98.

EUR/JPY plummeted yesterday when the DJIA was down some 1,500 points at one stage in panic selling as the correction extends and was closing around 1,175 points lower. (DJIA finished the day at 24,345.75 making for the worst daily point fall in history, ( but not quite the 100th biggest percentage decline), and erased all of its gains for the year so far).

EUR/USD more robust?

EUR/USD found some support at least in the upper 1.23 area overnight on the back of German factory orders data (+3.8% in Dec m/m)  although Eurozone retail PMI data was not as impressive. Politics had also an anchor on the previous recovery attempts, but the German coalition talks are looking more positive and are starting to progress in terms of the formation of a Grand Coalition (CDU/CSU and SPD). Some stability on vol would be a positive thing for the cross.  

In terms of the yen, risk reversals are showing an impressive rise in the premium for protection against near-term strength, and yield spreads have tightened in a JPY-supportive manner, according to analysts at Scotiabank who also note that domestic labour cash earnings data are scheduled for release today. 

EUR/JPY levels

EUR/JPY recovered back above 135.20 through the 4hr 200 SMA. More broadly, however,  analysts at Commerzbank explained that EUR/JPY failed to maintain the minor breach of the 137.18 downtrend from 1981 and that the new high was accompanied by a divergence of the daily RSI and the market has dived back to 6 month uptrend at 134.02, which is currently holding:

"While under pinned here it will remain capable of recovery. A move above 137.51 (Fridays high) will target the 139.94/140.00 2008-2018 resistance line. The 6 month uptrend will need to be eroded together with the 133.09 January low to re-target the 131.16 November low."