EUR/JPY gains traction above 149.00

• The EUR/JPY recovers the 149.00 zone after three days of losses.
• The headline and core IPCA slowed down to 6.1% and 5.3% year-on-year in May in the euro area.
• Christine Lagarde of the ECB stated that she is not satisfied with the inflation outlook.

The EUR/JPY pair bounced towards the 149.35 zone after bears were rejected at the 20-day SMA after three straight days of losses, and hit a daily high of 149.67. The euro gained ground on the back of hawkish Christine Lagarde’s remarks, despite the release of Eurozone (EZ) inflation figures for May, which showed a slowdown in prices. On the other hand, the Japanese Yen weakened against most of its rivals, but managed to strengthen against the US Dollar. For Thursday’s session, the Japanese economic calendar will have nothing relevant to offer.

The Euro remains firm despite the fall in German yields against a backdrop of slowing inflation

The Harmonized Index of Consumer Prices (HICP) of the European Union (EU) continued to decline in April, with a year-on-year rate of 6.1%, compared to the 6.3% forecast. The core index also slowed to 5.3% yoy, vs. 5.5% expected, vs. 5.6% previously. Other data showed that the unemployment rate stood at 6.5%, coinciding with the consensus.

In reaction, German yields fell across the board. The 10-year bond yield is trading at 2.25%, down 0.29% on the day. The 2-year yield stands at 2.73%, down 0.49%, and the 5-year yield stands at 2.24%, down 0.29%.

However, the euro managed to hold its own thanks to statements by the President of the European Central Bank (ECB), Christine Lagarde. He highlighted concerns about the persistence of high inflation and its prolonged duration, stressing that interest rate hikes are already having a significant impact on bank lending conditions, while expressing dissatisfaction with the current inflation outlook.

Levels to watch

The EUR/JPY pair presents a neutral outlook, according to the daily chart, while the Relative Strength Index (RSI) remains above 50 and the Moving Average Onvergence Divergence (MACD) prints red bars. The 4 hour chart also suggests that neither sellers nor buyers are in control, as indicators have turned somewhat flat, appearing to be waiting for direction.

Should the EUR/JPY continue to gain traction, the next resistance line is at the 149.50 zone, followed by the daily high near 149.70 and the psychological signal at 150.00. Furthermore, the 20-day SMA at the 148.80 level is key for the EUR/JPY. If broken, the pair could see a steeper decline towards the 148.50 and 148.00 area.