EUR/JPY suffers risk-off end to the month overnight, capped bleow 200-DMA

• EUR/JPY has fallen to a low of 120.44, capped head of the 200-DMA.
• Trade war headlines have soured market sentiment and is weighing on global stocks and the cross.

EUR/JPY had suffered a risk-off end to the month overnight, with a drop to the lowest level for days since registering a fresh high of 121.47 on the 21st October. The price has fallen to a low of 120.44, a trade or two away from the 21-day moving average and the September highs of 120 the figure and July 25th spike low. 

Trade war risk kicks in again

Overnight, stocks were shaken in a report that presumes a trade deal may not be so on the cusp of being put together as first thought. In a report from Bloomberg, it stated that "Chinese officials are casting doubts about reaching a comprehensive long-term trade deal with the U.S. even as the two sides get close to signing a “phase one” agreement."

The news has raised a number of pessimistic comments relating to Sino/US trade relations and has weighed on risk appetite as we head into a new month.“Even if they do get a phase one; Phase two is going to be substantially more difficult because all the really difficult issues are being deferred,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University.

During recent conversations with senior Chinese policymakers, Prasad said the common theme they expressed was scepticism, the article wrote, quoting Prasda, “They are quite pessimistic,” he said. “They fear that any deal that they negotiate with Trump could blow up in their face.”

Indeed, the cross is susceptible to such sentiment and will likely track global stocks lower should the concerns escalate. Having faced tough resistance from the current levels extending all the way up to the 200-day ma at 122.13, a line in the sand has been marked on the charts.

EUR/JPY levels

"It currently remains capped by the 121.34/ 50% Fibonacci retracement and the121.38 late July high (on a closing basis). Dips lower will find support at the 55-day ma at 119.95/118.76, ahead of the 118.00 uptrends," analysts at Commerzbank explained.