• EUR/JPY retakes the 149.00 area after three days of losses.
  • Headline and Core HICP decelerated to 6.1% and 5.3% YoY in May in the EZ.
  • ECB’s Christine Lagarde stated that she is not satisfied with the inflation outlook. 

The EUR/JPY rebounded towards the 149.35 area after the bears got rejected at the 20-day Simple Moving Average (SMA) following three consecutive days of losses, and reached a daily high of 149.67. The Euro gained traction on the back of hawkish Christine Lagarde remarks despite the release of inflation figures from the Eurozone (EZ) from May which showed a deceleration 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 won’t have anything relevant to offer.

The Euro holds its foot despite falling German yields amid decelerating inflation figures

The European Union (EU) Harmonized Index of Consumer Prices (HICP), continued to decline in April as the headline figure came in at 6.1% (YoY) vs the 6.3% expected. The Core reading also decelerated to 5.3% YoY vs 5.5% expected from the previous 5.6%. Other data showed that the Unemployment Rate came in at 6.5% matching the consensus.

As a reaction, the German yields declined across the board. The 10-year bond yield is trading at 2.25%, having declined by 0.29 % on the day. The 2-year yield stands at 2.73% with a 0.49% decline and the 5-year yield is at 2.24% seeing a 0.29% retraction.

However, the Euro managed to hold its ground on the back of European Central Bank’s (ECB) president Christine Lagarde’s hawkish remarks. She highlighted concerns about persistently high inflation and its prolonged duration, emphasizing that the interest rate hikes are already exerting a significant impact on bank lending conditions, while also expressing dissatisfaction with the current inflation outlook.

Levels to watch

The EUR/JPY  has a neutral outlook as per the daily chart while the Relative Strength Index (RSI) remains above 50 and the Moving Average Convergence Divergence (MACD) prints red bars. The 4-hour chart also suggests that neither the sellers nor the buyers have the control as indicators turned somewhat flat, seeming to be awaiting direction.

In case the EUR/JPY continues to gain traction, the following resistance line up at the 149.50 zone followed by the daily high near 149.70 and the psychological mark at 150.00. In addition,the 20-day Simple Moving Average (SMA) at 148.80 level is key for EUR/JPY. If breached, the pair could see a more pronounced decline towards the 148.50 area and 148.00 zone.