EUR/JPY: eyes on spreads and stock prices, now testing above 1-hr SMA

• EUR/JPY: finding it hard at the top of the cloud, stocks a concern.
• EUR/JPY: highly correlated to stock price action, where to from here?

EUR/JPY perked up on the correlation with US stocks paring losses from the start of the day. The cross is testing through the 21-hr SMA, currently,  trading at 133.13, up 0.02% on the day, having posted a daily high at 133.36 and low at 132.92.

All in all, equities have been pressured by the concern of higher borrowing costs as geopolitical risks have bee shelved for the time being, with Macron visiting Trump this week and looking to resolve the Iran deal before the 12th May deadline for when Trump said the US would withdraw from the 'deal'.  

• Kuroda wonders why yen is safe haven; watching neg' correlation to stocks - Scotiabank

Of course, there are the trade war and N.Korean risks simmering away in the background, but the main focus, for now, is the Fed and global yields on the rise. With the US 10 year yields basing on 3.00%, borrowing costs are a concern to corporates and the benchmarks have been sliding. The yen is highly correlated as a safe haven due to the nations large external surpluses which leave it less prone to sudden stops in capital flows. 

Capitulation is the theme and ECB is eyed

Capitulation is the theme today and the two-years have turned heads with being at the highest levels since 2008, attracting investors to short-term bonds opposed to the stock market that has been in a wobble on the back of Washington's protectionist policies and prospects of four rate hikes from the Fed this year alone.  From here, all eyes are on the ECB on Thursday - on hold, but how dovish will the outcome be and what about the value of the euro?

"Don't be surprised if Draghi says little if anything about the euro. The euro is trading at the lower end of a four-month trading range against the dollar.  Macroeconomists have little problem in explaining it.  After all, the US is paying a historically wide premium over Germany to borrow and much more than the inflation differential.  As a central banker, Draghi will be more interested in the euro on a real trade-weighted basis, which is better than bilateral nominal exchange rate for assessing the economic impact.  On this metric, the euro is in the upper half of its four-month range, " analysts at Brown Brothers Harriman explained.

• USD/JPY: will it follow rate spreads? - Nomura

EUR/JPY levels

"EUR/JPY has eroded the 133.24 50% retracement but is stalling at the top of the cloud at 133.43", analysts at Commerzbank explained, adding, "and we may see some consolidation here. We then look for further gains to the 134.25 61.8% retracement. Dips lower should be contained by the near term uptrend at 132.30 and while above here we will assume an upside bias."