FxWirePro: EUR/JPY holds 200-DMA support, euro bid on Italy news, Italy-Germany yield differential in focus for further direction

EUR/JPY chart on Trading View used for analysis

• EUR/JPY erased losses and the pair retraced brief dip below 200-DMA.
   
• Euro was buoyed on news that Italy is planning to cut its budget deficit to 2 percent in 2021.
   
• The single currency was under immense pressure in the past few trading sessions as Italy government's decision to adopt a budget deficit target of 2.4 percent triggered fears of a ratings downgrade.
   
• Focus now shall be on Italy-Germany yield differential for further direction. If the spread does not narrow sharply, then the EUR may surrender gains.
   
• Technical indicators on daily charts are neutral to slightly bearish. Stochs have rolled over from overbought levels and MACD is on verge of a bearish crossover.
   
• The pair finds strong support at 200-DMA and we see weakness on break below. Scope then for test of 38.2% Fib at 129.88.
   
• On the flip side, a decisive close above 5-DMA could see upside resumption.

Support levels - 131 (converged 21-EMA and 200-DMA), 130.14 (55-EMA), 129.23 (May 8 low)

Resistance levels - 131.74 (5-DMA), 132, 132.46 (Oct 1 high)

FxWirePro Currency Strength Index: FxWirePro's Hourly EUR Spot Index was at -6.49514 (Neutral), while Hourly JPY Spot Index was at 2.71675 (Neutral) at 0730 GMT.

For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex.