- EUR/JPY takes the bids to renew intraday high as yen drops across the board.
- BOJ policymakers contradict global central bankers while supporting easy money policies.
- ECB announced faster QT amid inflation, Ukraine fears but couldn’t save Euro the previous day.
- German inflation, risk catalysts may entertain traders with bulls on the driver’s seat.
EUR/JPY renews intraday top around 128.45, up 0.70% on a day heading into Friday’s European session. The pair’s latest gains could be linked to the broad weakness of the Japanese yen (JPY) due to the Bank of Japan’s (BOJ) bearish bias, versus the global push for monetary policy normalization.
Earlier in Asia, an anonymous BOJ official mentioned, “Japan's economic, price conditions do not allow withdrawal of stimulus.” On the contrary, the European Central Bank (ECB) announced the faster withdrawal of easy money policies the previous day. “The statement from the ECB, which left the door open to an interest rate hike before the end of 2022 as soaring inflation outweighs concerns about the fallout from Russia's invasion of Ukraine, briefly sent the euro higher, before market sentiment turned negative,” said Reuters.
Not only the ECB but other major central banks like the US Federal Reserve (Fed), Bank of Canada (BOC) and the Bank of England (BOE) are also hawkish of late as the inflation fears mount due to the Ukraine-Russia geopolitical tussles.
It’s worth noting, however, that the yen’s safe-haven appeal restricts the EUR/JPY gains amid recently released risk-negative headlines. Among them, the US push to Russia’s preferred trade status and economic aid package for Ukraine are the major ones. On the same line was Moscow’s request for an emergency United Nations (UN) Security Council meeting to discuss the usage of chemical or biological weapons, as well as airstrikes in the far West of Ukraine.
While portraying the mood, stock futures in the US and Europe print losses whereas the US 10-year Treasury yields also drop.
Moving on, the final reading of Germany’s Harmonized Index of Consumer Prices (HICP) for February, expected to confirm the 5.5% level, will offer immediate direction to EUR/JPY traders. However, major attention will be given to Ukraine-Russia headlines and next week’s BOJ meeting.
“Both the Federal Reserve and the Bank of Japan have policy meetings next week, but while the Fed is all but certain to hike rates from their pandemic low, the BOJ is set to remain an outlier and hold onto a dovish stance on monetary policy, weighing on the yen,” said Reuters.
Technical analysis
Although monthly resistance break propels EUR/JPY towards the 129.00 threshold, a convergence of 100 and 50-DMA, around 129.75-80 appears a tough nut to crack for the pair buyers moving forward.
