Wednesday's low breaks

No one wants to touch the euro with so much political risk on the calendar. Yes, Marine Le Pen is way behind and the last two days of polls showed Macron making some headway.

But the market has been burned by polls twice in the past 8 months and the stakes are even higher in the French election with Le Pen aiming to leave the euro.

The technicals in EUR/JPY are doing a great job of telling the story. While the Eurozone economy is improving, the political risk is eroding confidence and investment. The pair is going to close out the week on the lows and at the worst levels in three months.

Still, there is a risk of a bounce from here. The 50% retracement of the rally since late October is nearby and the 200-dma is 90 pips below. The pair has also fallen in 4 straight days and 6 of the past 7 so I don't see a risk-reward argument for selling here.

But going forward, this is a better chart to watch regarding Eurozone political risks than EUR/USD or EUR/GBP because it takes out the Trump and Brexit factors. That said, there are a few things on the Japanese calendar next week that can't be ignored.