EUR/JPY hits new daily high around 164.70 awaiting ECB decision

• EUR/JPY rebounds more than 50 pips from daily low amid some repositioning ahead of ECB.
• The BoJ's dovish outlook continues to weaken the Yen and acts as a tailwind for the cross.
• Fears of intervention could limit Yen gains and losses ahead of the central bank risk event.

EUR/JPY attracts some downside buying near the 164.15-164.10 area on Thursday and hits a new daily high during the first half of the European session. Prices are currently trading around the 164.65-164.70 area and so far appear to have snapped a two-day losing streak to the weekly low hit on Wednesday.

The Japanese Yen (JPY) continues to be hurt by caution from the Bank of Japan (BoJ) and uncertain prospects for future rate hikes. Apart from this, some repositioning trades ahead of the highly anticipated European Central Bank (ECB) meeting are acting as a tailwind for the EUR/JPY cross. That said, a combination of factors could hold back bulls from placing aggressive bets and limit rallies.

Verbal warnings from Japanese authorities that they would intervene in the markets in the event of any excessive decline in the national currency, coupled with market caution, could help limit losses in the safe-haven Yen. Aside from this, bets that the ECB will start cutting interest rates in June, amid a faster-than-expected decline in Eurozone inflation, should help keep EUR/JPY in check.

Market attention will therefore remain focused on the new economic projections, which, together with ECB President Christine Lagarde's comments at the post-meeting press conference, will be taken into account for clues about the calendar of the first rate cut. This, in turn, will influence the common currency in the short term and give new directional momentum to the EUR/JPY cross. However, the fundamental context justifies caution for bullish traders.