EUR/JPY: Off 7-month lows, bargain hunters capping downside?

• Trade war fears pushed EUR/JPY down to a 7-month low of 128.94.
• Bargain hunters/Japanese insurers seem to have bought USD/JPY below 105.00.

The Japanese Yen jumped across the board as President Trump's decision to impose tariffs on $60 billion worth of Chinese imports sent US stock prices tumbling.

The Dow Jones Industrial Average closed down 723 points - the biggest point decline since Feb. 8, when it fell by more than 1,0000 points.

Consequently, the EUR/JPY cross fell to 128.94 in Asia - the lowest level since late August. As of writing, the currency pair is trading at 129.25. The recovery could be due to Japanese insurers and bargain hunters stepping in to buy dollars below 105.00. Japan's Nippon Life had announced earlier this year that it would buy sub-105.00, according to a Reuters report.

That said, the relief could be short-lived as the S&P 500 futures are down 0.5 percent, signaling the investors see a real risk of a full-fledged US-China trade war.

EUR/JPY Technical Levels

A break below 128.48 (Aug. 24 low) would open doors for 128.05 (Aug. 11 low) and 127.56 (Aug. 18 low). On the other hand, a break above 129.35 (March 5 low) could yield a re-test of 130.18 (descending 5-day MA) and 130.68 (10-day MA).