EUR/JPY: Bulls and bears tug of war over 21-DMA

• Price hugs the 21-DMA as investors look to Sino/US trade deal headlines for impetus.
• Beijing may decide to ‘fight and talk alternatively’ and is now closely monitoring the US president’s next move following the vote by Congress - SCMP

EUR/JPY has morphed into a sideways drift along the support of the 50-day moving average while hugging the 21-day moving average. In early trade, the cross has stuck to a narrow range of between 120.06 and 120.16 while markets await any additional bombshell trade headlines in the absence of any core economic data other than today's Japanese Consumer Price Index which arrived as follows:

• Japan CPI (YoY) Oct 0.2% (est 0.3%; prev 0.2%)

EUR/JPY is a cross that correlates to the performance in global equities, for the most trading in tandem with price action with the major benchmarks. Overnight, US markets were continuing to bleed out preventing an upside correction in the cross. As ever, the markets are fixated on trade-deal developments between the US and China, monitoring the ongoing conflicting headlines rolling out one after the other through the various media sources. 

The bigger picture which markets are rolling with appears to indicate that a deal is still some way off from being a possibility at this juncture which is weighing on risk-sentiment and the cross – The main headline came from the South China Morning Post, in an article entitled, "China watching Donald Trump’s response to US Hong Kong bill as it threatens to become new barrier to trade deal," and bullet points as follows: 

• One source says Beijing may decide to ‘fight and talk alternatively’ and is now closely monitoring the US president’s next move following the vote by Congress
• China reacted angrily to the proposals, accusing Washington of interfering in its internal affairs, and may feel obliged to respond.

EUR/JPY levels

The cross is hugging the 21-day moving average and a break higher will likely give shape to an upside bias targetting the 200-DMA located at the 122 handle while meets a 50% Fibonacci retracement target of the mid-March highs to YTD lows. However, on the flip-side, a break below the cluster of the 21 and 50 DMAs opens risk to the Oct lows of 117.07