EUR/JPY traces firmer yields above 157.00, Eurozone inflation clues, Japan intervention eyed

• EUR/JPY picks up bids to renew intraday high, consolidates the biggest weekly loss in five.
• Yields recover as fears of economic slowdown join US-China jitters.
• Mixed German data, fears of Japan intervention weigh on prices.
• Eurozone PPI, risk catalysts will be crucial for clear directions.

EUR/JPY prints mild gains around 157.35-40 as it pares the previous day’s losses heading into Wednesday’s European session. In doing so, the cross-currency pair traces the upbeat US Treasury bond yields amid fears of the economic slowdown and chatters surrounding Japan’s meddling to defend the Yen.

Ever since the Japanese Yen (JPY) refreshed yearly top in the last week, the policymakers have been loud-mouthed to signal that they can intervene in the markets and safeguard the domestic. Among them, Japanese Finance Minister Shunichi Suzuki and the nation’s top currency diplomat Masato Kanda gain major attention. However, nothing major has been reported yet, making the Japanese currency vulnerable to decline further.

On the other hand, the difference between the two-day and 10-year US Treasury bond yields widened to the most in 42 years and flagged recession fears on Monday, which in turn prod the sentiment and prod the EUR/JPY buyers, due to Yen’s heaven appear. That said, the S&P00 Futures print mild losses whereas the US 10-year and two-year Treasury bond yields grind higher to nearly 3.86% and 4.92% by the press time.

Elsewhere, downbeat prints of China’s Caixin Services PMI for June, to 53.9 versus 57.1 prior, join the escalating fears of the US-China tension amid fresh warnings of further trade restrictions from Beijing. The same allows the yields to remain firmer while also poking the Euro bulls.

It should be noted that the downbeat German data and doubts about the European Central Bank’s (ECB) hawkish signals keep the EUR/JPY bears hopeful. On the other hand, Japan’s Jibun Bank Services PMI eased to 52.1 in June versus 54.2 prior and defends the Bank of Japan’s (BoJ) dovish bias, which in turn underpins the EUR/JPY upside.

Looking ahead, updates on the Japanese government’s market intervention to defend the Yen will be the key to determining immediate EUR/JPY moves. Also important will be the Eurozone Producer Price Index (PPI) for May and headlines surrounding the key risk catalysts like the US-China tussles and the recession woes.

Technical analysis

Double top formation around the 158.00 round figure lures EUR/JPY sellers. However, a clear break of 156.70 becomes necessary to confirm the bearish move.