EUR/JPY recovers following ECB accounts from June’s meeting

• EUR/JPY’s bulls gained ground following seven consecutive days of losses and jumped to 154.90.
• ECB’s accounts confirmed two additional hikes in 2023.
• China’s weak data weights on the JPY.

On Thursday, the EUR/JPY managed to stop the bleeding following a seven-day losing streak and jumped towards the 154.90 area. The Euro gained traction following the release of the European’s Central Bank (ECB) accounts from the June meeting, and the Yen lost ground against most of its rivals amid weak Chinese Trade Balance data.

ECB’s monetary policy accounts showed that most of the Governing Council supported a 25 basis points (bps) hike in June and confirmed that a minimum of two additional increases were needed. In addition, the members “could consider” hiking beyond July if necessary.  That being said, the ECB’s tightening expectations remain steady. World Interest Rate Probabilities (WIRP) suggests that a 25 basis points (bps) hike is already priced in for the July meeting, and additional hikes of a quarter of a percentage points rise to 60% and 80% in September and October, respectively. The markets foresee no more hikes following December.

During the early Asian trading hours, China released that its trade surplus rose to $70.62 billion from $65.81 billion in June. In addition, Imports and Exports declined by 6.8% and 12.4% YoY respectively in the same period. In that sense, the Bank of Japan (BoJ) should monitor its biggest trading partner situation as it could aggravate the local economic downturn. 

In addition, Japan's currency diplomat Masato Kanda cited that deflationary norms “may be changing” and that the BoJ is closely monitoring the FX markets. It's worth noticing that the JPY had gained ground in the previous session thanks to expectations on a Yield Control Curve (YCC) policy tweak by the BoJ, so any hints of a pivot may contribute to limiting the Yen’s losses.

EUR/JPY Levels to watch

According to the daily chart, the EUR/JPY still holds a negative outlook for the short term. Indicators display weakness, with the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) standing in negative territory. However, on the bigger picture the outlook favour the Euro as it holds above the 100 and 200-day Simple Moving Averages  (SMAs)

Support Levels: 153.40, 153.00, 152.50.
Resistance Levels: 155.40, 156.17 (20-day SMA), 157.00.

EUR/JPY Daily chart