Tokyo players shun EUR and GBP pre-elections, after?
June 18 (Reuters) -Tokyo players are likely to shun EURand GBP until Frenchand British elections in July. Depending on the outcomes, EUR/JPY and GBP/JPY could remain out of favour even beyond next month.
EUR/JPY fell to a 167.54 EBS lowon June 14 following right-wing party gains in European Unionelections and French President EmmanuelMacron's call for snap legislative elections.
With French politics now seen polarized asthe far-left and far-right gainin popularity at the expense of centrists, political uncertainty in Europe's second-largesteconomy should keep investors in France and Europe at large on tenterhooks.
Flight-to-quality flows saw the French 10-year OAT yield surge to 3.338% on June 11. The yield on 10-year Treasuriesfell to 4.188% on June 14 as investment flows shifted to the U.S. Flows were directed to Germany too, sending 10-year bund yieldsdown to 2.341% on June 14.
EUR/JPY has recovered somewhatfrom Friday's swoonbut the bias will likely still be sell into rallies. Key downside support is atthe ascending 55-day moving average at 167.45. The daily Ichimoku cloud is below between 165.90-166.81.
GBP/JPY is down too from its multi-year highof 201.61 on June 14. Britons will go to the polls on July 4, and the consensus view is for the ruling Conservative Party to lose.
Although anychange in policies may not be as dramatic as in France wherethe far-right iscalling for "Frexit" (Brexit has already taken the U.K. out of the EU), considerable uncertainties remain and should capsterling.
GBP/JPY support is eyed from the daily Ichimoku tenkan line at 199.97. The kijun line is at 198.30 and 55-DMA at 196.06 below.
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EUR/JPY: https://tmsnrt.rs/3RxUKUP
GBP/JPY: https://tmsnrt.rs/3Xy8inn
Haruya Ida is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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