EUR/JPY snaps two-day uptrend at multi-month top surrounding 158.00 on Japan meddling fears

• EUR/JPY takes offers to print the first daily loss in three, stays near the highest levels since September 2008.
• Japan authorities keep showing readiness to defend Yen but haven’t acted of late.
• Recession woes, US-China jitters and downbeat EU/German PMIs are extra negatives for cross-currency pair.

EUR/JPY prints the first daily loss in three while refreshing the intraday low around 157.55 heading into Tuesday’s European session. In doing so, the cross-currency pair justifies the market’s cautious mood, as well as the chatters about Japan’s meddling in the markets to defend the Yen (JPY).

Market sentiment remains mostly downbeat of late as fears of the US-China tussle renew even as US Treasury Secretary Janet Yellen is in Beijing to restore the Sino-American business ties. The reason could be linked to the Wall Street Journal (WSJ) news suggesting “The Biden administration is preparing to restrict Chinese companies’ access to U.S. cloud-computing services, according to people familiar with the situation, in a move that could further strain relations between the world’s economic superpowers.”

Additionally weighing on the market sentiment, as well as on the EUR/JPY price, could be the fears of recession flagged by an inversion between the US 10-year and two-year Treasury bond yields as it jumped to a fresh high since 1981 the previous day. “The yield curve briefly inverted to 42-year lows Monday as investors increasingly expect the Fed to raise its benchmark borrowing rates to keep inflation in check,” said Reuters. That said, the US two-year Treasury bond yields dropped to 4.85% while the 10-year counterpart fell to 3.78%, before ending Monday’s trading around 4.93% and 3.86% respectively.

Softer European and German statistics also add strength to the bearish bias surrounding the EUR/JPY pair. On Monday, the final readings of June’s German HCOB Manufacturing PMI and the same manufacturing gauge for the Eurozone came in softer-than-expected respective figures of 41.0 and 43.6 to 40.6 and 43.4.

Even so, European Central Bank (ECB) policymaker Joachim Nagel said that monetary policy signals are clearly pointing in the direction of further tightening. The policymaker also added that they will have "a way to go" with regard to additional rate increases, per Reuters.

On the other hand, Japanese Finance Minister Shunichi Suzuki said on Tuesday, he is “keeping in close contact with the US at the vice-ministerial level on FX.” Earlier in the day, the nation’s top currency diplomat Masato Kanda said that he is communicating with various countries including the US over currencies, per Reuters.

Against this backdrop, S&P500 Futures retreated even as Wall Street managed to post minor gains.

Moving on, German trade numbers for May and the aforementioned risk catalysts will be important for the immediate EUR/JPY direction.

Technical analysis

A confirmation of a one-week-old bearish triangle becomes necessary to convince EUR/JPY sellers to take the risk of entering a short-term position. As a result, 157.30 appears short-term key support.