The euro weakened against the Japanese Yen throughout the mid-Asian session this Friday (24/7). The EURJPY currency pair must be willing to trim a few gains after a strong risk-off tone in the global market. One factor supporting the weakening of the Euro currency is that global stock markets are also moving red.

In mid-Asia, the pair moved around the 123.70 exchange rate or represented a decline of around 0.17%. Previously the pair briefly held around the 124.24 exchange rate before the Japanese Yen experienced a quite strong purchase.

Movements in Asian stocks such as Japan's Nikkei, Hang Seng HK, and Kospi declined. The possibility of weakening Asian shares took a negative tone that was also seen on Wall Street last night. The heat of the relationship between the US and China may be the cause of the weakening of global risks in recent times.

On Thursday, China said pressure to close the Chinese consulate in Houston had worsened relations between the two countries. China also warned there would be a countermeasure and would have an impact of concern on global equity markets.

Causes of Euro Weakening

In addition to the US and China issues, US economic data reports last night also greatly caused market risk to dominate and bring the Euro weakened. US unemployment claims data rose higher than previously predicted. Regrowing concern over the subsequent global economic conditions.

The weakening Euro could improve if the stock market can recover again. Given the current S&P 500 futures can record a rise of 0.17% against the red tone of Wall Street. Some economic data regarding the initial PMI from Germany and the European region will move the pair if it is higher than expectations.

The EURJPY currency pair has decreased from the highest peak in the past 6.5 months at 124.29. With the Euro weakening recently it has brought the currency pair down to 123.90 during the mid-Asian session this Thursday (7/23). Possibly one of the causes of the recent decline was due to technical factors RSI 14 in the daily.

Then the weakening Euro at this time is likely due to the cautious attitude of the market participants and global investors. They appear to be awaiting the ratification process in the European Union's parliament regarding the recovery fund which yesterday received mutual agreement. The fund has a value of up to 750 billion euros to be able to restore the European economy after the pandemic.

Impact of Risk-Off on EURJPY

Danske Bank said that the possibility of a European Union parliament would be quite disappointed with the total approved budget. Therefore the ratification process by parliament will be highly considered by global investors. 

If the parliament does not agree on the recovery fund, then it could risk bringing the Euro weaker further against the Japanese Yen. Moreover, recently the Japanese Yen has benefited greatly from the dominating risk-off flow. Despite the recent upsurge in Coronavirus cases in Japan and disappointing Japanese data.

Additional pressure for the Euro currency also came from the problem of the US and China conflicts that are heating up again. The two countries were tense again after the US pressured China to close its consulate office in Houston.

If this problem continues to be extended it will cause the Japanese Yen to dominate again. Because investors will be very careful before entering into risky assets including the Euro. Not forgetting investors are also the focus of the process of ratification of recovery funds by the European Parliament.

Previously the Euro could get positive impetus after investors expect there will be additional stimulus from the US. Positive encouragement also came from the European Central Bank ECTR. Unfortunately, all these positive signals remain unable to counter the risk-off tone that still weighs on global financial markets.