EUR/JPY hovers below 150.00 as US Treasury yields decline

• EUR/JPY retreated to a daily low near the 149.60 area.
• Euro weakened against the JPY on the back of falling government bond yields.

EUR/JPY trades with mild losses, hovering around the 149.75 area. Data from the Euro zone showed a negative Gross Domestic Product revision to Q1 figures. On the other hand, Japan also reported weak GDP figures on the Asian session but falling German and American yields seem to be favouring the JPY.

German yields decline following EZ Q1 GDP data

Eurostat released that the Gross Domestic Product (GDP) for the Eurozone in Q1 contracted by 0.1% QoQ while markets expected a stagnation. On the other hand, the annualized growth rate of the GDP came in at 1% vs the consensus of 1.2%.

Taking this into consideration, the German yields have declined across the curve as weak economic data from the EZ makes investors think that the European Central Bank (ECB) may not be obliged to continue hiking rates following next week’s meeting where a 25 basis points (bps) hike its already priced in. In that sense, the 10-year bond yield fell to 2.42% seeing a 1.06 % drop on the day, while the 2-year yield sits at 2.94% with a 1.17% slide and the 5-year yielding 2.43% with a 1.06% decline respectively.

On the other hand, Japan's Cabinet Office revealed that the country's Gross Domestic Product (GDP) unexpectedly contracted by 0.3% in Q1, falling short of the anticipated 0.5% expansion. However, the annualized rate showed a positive growth of 2.7% compared to the previous 1.6%. Adding to this, weak economic activity data from Japan may fuel a more dovish stance from the Bank of Japan (BoJ) and hence, continue to weigh on the domestic currency.

EUR/JPY Levels to watch

The EUR/JPY is currently exhibiting a neutral to bullish bias in the short term. Although the bullish momentum has waned, the pair continues to hold above the 20,100 and 200-day Simple Moving Averages (SMA), suggesting that on the bigger picture, the bulls have the upper hand.

On the upside, a move above the 149.80 zone would suggest a continuation of the bullish trend for the EUR/JPY, with the next resistances at the 150.00 area and 150.50 level. On the other hand, in case of further downside, support levels line up at the 20-day SMA at 149.30 and below around the 149.00 area and the 148.50 zone.