EUR/JPY traces yields to retreat from multi-year high above 144.00, German/EU data eyed

• EUR/JPY consolidates the biggest daily gains in a week around the highest levels since late 2014.
• US 10-year, two-year Treasury bond yields retreat from multi-day peak as markets turn cautious ahead of US CPI.
• Economic fears in the bloc jostles with hawkish ECBspeak to test recent moves.
• Final readings of Germany’s inflation, ZEW data will be important for immediate direction.

EUR/JPY prints mild losses around 144.40 heading into Tuesday’s European session. In doing so, the cross-currency pair retreats from the highest levels since December 2014, marked the previous day, while paring the biggest daily gains in a week.

Although the cautious sentiment ahead of the all-important US Consumer Price Index (CPI) could be considered the key catalyst for the pair’s latest consolidation, softer yields are also a reason to lure the countertrend traders.

That said, the US 10-year Treasury yields retreat from a three-month high, down two basis points (bps) to 3.34%. It should be noted that the US two-year Treasury yields snap a three-day uptrend as they ease from the highest levels since late 2007, down half a percent near 3.547% at the latest.

On the other hand, fears of Germany’s economic slowdown join chatters over the Bank of Japan’s (BOJ) market intervention to weigh on the pair prices. On Monday, Germany's Ifo Institute announced that it revised its 2023 growth forecast to -0.3% from 3.5% in June. The institute further noted that the annual inflation expectation for 2023 got revised higher to 9.3% from June's forecast of 6%. For 2022, Ifo now sees the economy growing by 1.6%, down from 2.5% in June, and forecasts 8.1% inflation (6.8% in June), as reported by Reuters.

Elsewhere, a mixed print of Japan’s Producer Price Index (PPI) for August, softer on MoM and firmer on YoY, seemed to have weighed on the EUR/JPY prices amid a sluggish session. Also acting as the bearish catalysts are the fears surrounding the Sino-American tussles and the Russia-Ukraine war, not to forget hawkish central bankers amid recession fears.

With this in mind, EUR/JPY traders may pay attention to the final readings of Germany’s August month Harmonized Index of Consumer Prices (HICP), expected to confirm 0.4% MoM initial estimations, which will precede the ZEW sentiment data for September for the bloc and for Germany to determine immediate EUR/JPY moves.

Technical analysis

Unless providing a daily closing below June’s top surrounding 144.25, EUR/JPY remains on the way to an upward sloping resistance line from mid-2021, close to 146.90-95 by the press time.