EUR/JPY floats above 130.00 as ECB’s Holzmann sounds hawkish, sentiment improves

• EUR/JPY keeps the previous day’s rebound from two-week low.
• Risk appetite improves amid absence of Russia’s retaliation to Western sanctions, lack of major updates.
• Off in Japan, light calendar elsewhere also allows traders to consolidate recent losses.

EUR/JPY extends bounce off the intraday low around 130.30 heading into Wednesday European session.

In doing so, the cross-currency pair holds onto the previous day’s recovery moves from the lowest levels since February 03 while cheering the recently positive mood in the market, as well as upbeat comments from a European Central Bank (ECB) official.

“ECB could begin increasing interest rates before ending its bond purchasing programme, ECB policymaker Robert Holzmann said in an interview with Swiss newspaper NZZ, saying a rate change would be possible already in summer,” per Reuters.

The news also mentions the record inflation to portray the recent ECB policymakers’ comments favoring the end of bond purchases this year, which was previously considered as a prerequisite for any rate hike. However, ECB’s Holzmann took a step further and said, per Reuters, “it was possible for the ECB to veer away from the policy guidance that any interest rate increase would only come ‘shortly after’ quantitative easing ends, and move to change interest rates first.”

Elsewhere, Russia’s refrain to challenge the harsh Western sanctions and comments from US President Biden like, “We have no intention of fighting Russia,” seem to have favored the market’s sentiment of late. The lack of major catalysts and silent macros, not to forget the holiday in Japan, also contributes to the EUR/JPY upside.

That said, stock futures in the US and Europe print mild gains while the US Treasury yields remain inactive at around 1.94%, due to off in Japan, after rising around 2.0% daily in the previous day.

Looking forward, Germany’s GfK Consumer Confidence Survey for March, expected -6.3 versus -6.7 prior, will join comments from ECB policymakers to entertain intraday EUR/JPY traders. However, major attention will be given to risk catalysts.

Technical analysis

200-DMA and fortnight-long descending trend line highlight 130.40 as the key short-term upside hurdle.