EUR/JPY retreats to 157.00 as bears gain momentum

• EUR/JPY cleared daily gains and fell to the 157.00 area after peaking at 157.72.
• European Services PMIs from June showed disappointing results.
• JPY gains interest as the probabilities of a BoJ intervention rise.

EUR/JPY faced selling pressure, leading to a retreat towards 157.00, erasing earlier gains from its peak at 157.72. Disappointing European Services PMIs for June contributed while the Japanese Yen gained interest as market probabilities of a potential Bank of Japan (BoJ) intervention increase as the USD/JPY approached 145.00.

The Euro faced selling pressure on weak Services PMIs

The recently released PMI data from  S&P Global and Hamburg Commercial Bank (HCOB), indicated that French and Spanish Services PMIs for June fell short of expectations, registering at 47.2 and 53.4, respectively. On the other hand, the German and Italian indexes remained unchanged from their previous figures, with readings of 54.1 and 52.2, respectively. Overall, the Eurozone's PMIs came in at 52, slightly below the anticipated 52.4, signalling a slight deceleration but still indicating expansion in the sector.

On the other hand, the Bank of Japan’s (BoJ) dovish stance has significantly weakened the Yen in the previous session as economies entered another tightening cycle and higher interest rates tend to be positively correlated with the value of a currency. As a result, the USD/JPY rose to 145.00 psychological level last Friday, so escalating odds of further intervention by the BoJ to support the Yen may limit its downside potential.

EUR/JPY Levels to watch

The bulls finally gave up. After showing overbought conditions in the daily chart since mid-June, indicators finally show some weakness. The Relative Strength Index (RSI) fell below the 70.00 threshold, while the Moving Average Convergence Divergence shows decreasing green bars suggesting that the bears may take control.

On the downside, support levels to monitor stand at the 156.70 area, followed by 156.00 and 155.00. On the upside, if the bulls regain momentum, resistance levels are seen at 157.50, followed by 158.00 (cycle-high) and 158.50. 
 

EUR/JPY Daily chart