EUR/JPY extends monthly resistance break above 128.00 ahead of ECB

• EUR/JPY challenges the one-month-old downtrend around weekly high, sidelined of late.
• Euro bulls expected ECB to utter plans to battle stagflation fears even as monetary policy isn’t expected to change.
• Nikkei 225 posts biggest jump in 19 months amid hopes of overcoming Russia-Ukraine crisis.
• ECB, Kyiv-Moscow talks join US CPI for February to entertain momentum traders.

EUR/JPY grinds higher around weekly top, up 0.11% intraday near 128.35 heading into Thursday’s European session.

In doing so, the cross-currency pair rises for the third consecutive day while keeping the previous day’s upside break of a one-month-old descending resistance line, now support.

Also underpinning the bullish bias is the market’s cautious optimism over the Russia-Ukraine peace talks, as well as hopes that the European Central Bank (ECB) will sound hawkish alarms even if the benchmark rate and bond purchases are likely to remain unchanged.

Risk appetite improved as Ukraine’s retreat from NATO joined readiness to compromise on certain goals, if Russia does the same hinted an immediate solution to the grim conditions in Kyiv. Though, Moscow’s rejection to concede anything joins the West versus Moscow tussles, via Kyiv, to weigh on the mood of late.

Even so, a stellar rally by Japan’s Nikkei 225, the biggest daily jump since June 2020, joins easy US Treasury yields to weigh on the yen’s safe-haven demand. Elsewhere, stock futures in the US and Europe fail to track Wall Street gain amid anxiety over the key issues.

That said, diplomats from Ukraine and Russia will meet in Turkey on Thursday. Given the recently increasing hopes of a diplomatic solution, a disappointment will have higher chances of roiling the EUR/JPY uptrend. Also, the ECB is likely to utter hawkish words as it battles fears of stagflation, which in turn highlights the monetary policy decision despite the unexpected change in the key measures.

Read: ECB Preview: More pain for the euro as doves may strike back amid Ukraine crisis, stagflation risks

It should be noted that the monthly prints of the US Consumer Price Index (CPI) for February, likely rising to 7.9% from 7.5% prior, will also act as an important catalyst.

Read: US February CPI Preview: Will hot inflation force Fed’s hand?

All in all, Thursday is set to become another active day for the global markets, not just for EUR/JPY.

Technical analysis

A daily closing above the monthly resistance line, at 128.00 by the press time, joins steady RSI and receding bearish bias of MACD to direct EUR/JPY bulls towards a convergence of the 50-DMA and the 100-DMA around 129.80-85.