EUR/JPY bulls attack 157.70 key resistance on softer Japan wages, ignores unimpressive Germany inflation

• EUR/JPY picks up bids to refresh intraday high, prods six-week-old descending resistance line.
• Germany’s inflation gauges match initial forecasts for July.
• Downbeat Japan real wage pushes back BoJ hawks even as YCC tweak, sluggish yields prod Yen sellers.
• Risk catalysts eyed for clear directions, technical breakout can challenge yearly top.

EUR/JPY takes the bids to refresh its intraday high near 157.70 as it pokes a 1.5-month-long falling resistance line heading into Tuesday’s European session. In doing so, the cross-currency pair pays little heed to the downbeat German inflation clues, confirming the initial forecasts, as well as the sluggish Treasury bond yields. That said, the pair’s run-up could be linked to the increasing odds of the Bank of Japan’s (BoJ) sustained easy-money policy backed by the latest wage data from Tokyo.

Earlier in the day, Japan’s Labor Cash Earnings came in better-than-forecast for June but the real wages were downbeat enough to defend the dovish bias about the BoJ. That said, Japan’s inflation-adjusted real wages dropped for the 15th consecutive month in June to 1.6% YoY versus 0.9% prior.

On Monday, the Bank of Japan’s (BoJ) Summary of Opinions for the July meeting showed that one member said the achievement of 2% inflation in a sustainable and stable manner seems to have clearly come in sight.

It’s worth noting that the tweaking of BoJ’s Yield Curve Control (YCC) policy previously triggered the EUR/JPY pullback.

Elsewhere, Germany’s inflation gauges per the Harmonized Index of Consumer Prices (HICP) and the Consumer Price Index (CPI) match initial forecasts of 6.5% YoY and 6.2% YoY and confirm the bearish bias about the European Central Bank (ECB).

Previously, the Eurozone Sentix Investor Confidence improved to -18.9 for August from -22.5 in July, versus the market consensus of a -23.4 reading. Following the data, Sentix Managing Director Patrick Hussy termed Germany as the sick man of the Eurozone while also adding, “The economy in the Eurozone remains in recession mode. There can therefore be no joy about this development.”

Amid these plays, S&P500 Futures prints mild losses around 4,530 as it retreats towards the monthly low marked the last Friday, reversing the first daily gain in five marked on Monday. That said, the US 10-year and two-year Treasury bond yields remain pressured around 4.06% and 4.76% by the press time.

Looking ahead, a light calendar may challenge the EUR/JPY pair’s upside move targeting the yearly top of 158.00.

Technical analysis

An impending bull cross on the MACD joins the upward-sloping RSI (14) line, not overbought, to propel EUR/JPY prices toward a six-week-old descending resistance line surrounding 157.70, a break of which could push buyers toward the yearly high marked in June near 158.00.  Meanwhile, the 21-DMA puts a floor under the prices near 155.95.