EUR/JPY retreats sharply from 17-month tops, drops below 130.00 handle

The EUR/JPY cross stalled its strong bullish trajectory just ahead of the 131.00 handle and witnessed a sharp retracement on Wednesday, reversing previous session's strong gains to 17-month tops.

A fresh wave of global risk aversion trade, which boosted the Japanese Yen's safe-haven demand, prompted traders to take some profits off the table, especially after the pair's recent upsurge of over 600-pips over the past couple of weeks. 

The selling pressure aggravated after today's weaker-than-expected German WPI print, coming in to show a flat m-o-m reading for June and yearly rate dropping to 2.5% as compared to 3.1% recorded in the previous month.

With today's fall back below the key 130.00 psychological mark, the cross has now eroded over 100-pips from the highest level since Feb. 2016 touched yesterday and seems poised to extend the corrective slide amid near-term overbought conditions and renewed political jitters from the US.

In absence of any major market moving economic releases, broader market risk sentiment would continue to act as an exclusive driver of the pair's movement through Wednesday's trading session.

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Technical levels to watch

A follow-through selling pressure has the potential to continue dragging the pair further towards 129.30-25 intermediate support en-route the 129.00 handle. A convincing break below the mentioned handle could extend the corrective slide further towards 128.40-35 horizontal support.

On the upside, momentum back above the 130.00 handle now seems to confront some fresh supply near the 130.35 region, above which the cross seems all set to aim towards reclaiming the 131.00 handle before heading towards its next hurdle near mid-131.00s.