EUR/JPY making higher daily lows, US CPI looms

• EUR/JPY idles in the consolidation of last weeks rally as traders get set for US CPI data. 
• The cross is making a series of higher lows, so there is wind beneath it still. 

At 131.92, EUR/JPY is flat on the session and sticking to a 131.86, 132.04 range so far on the day as traders await, in high anticipation, for the US inflation data scheduled for the New York morning session. 

the cross is consolidating a parabolic move in the daily from the 3rd Feb business which followed a surprisingly hawkish outcome of the European Central Bank meeting. The governor of the ECB, Christine Lagarde said inflation risks were said to be tilted to the upside and there was no repeat of a comment that a 2022 hike was very unlikely. Instead. some policymakers wanted to take action on Thursday's meeting and the markets reacted in kind. The euro shot higher, extending its recovery vs. the US dollar and the cross followed in tow. 

However, as the dust settled and on conflicting comments at the start of the week from Lagarde, the euro turned on a dime. It has continued to retreat from near a three-month high to Japan's currency mid-week. The ECB's Lagarde said on Monday there was no need for extensive tightening, trying to temper rising expectations for aggressive action after she last week opened the door a crack to a potential rate rise this year.

Meanwhile, improved risk sentiment, however, has helped to put a floor under the cross that is making a series of higher daily lows this week. World stocks rallied on Wednesday. European bourses were gaining on strong earnings as investors put aside worries about rising interest rates for now. With that being said, the greenback touched a one-month high versus the yen on Wednesday, boosted by a climb in Treasury yields to multi-year peaks in anticipation of strong inflation data later today. The data could boost sentiment around Federal Reserve policy tightening.

Markets are pricing in more than a 70% chance of a 25 basis point hike and a nearly 30% chance for a 50 basis point hike when U.S. policymakers meet in March, according to CME's FedWatch Tool. this comes a the markets are in anticipation that the US Consumer Price Index will have risen by over 7% year-over-year in January.

EUR/JPY technical analysis