EUR/JPY crosses 156.00 on mixed Japan data, BoJ action ahead of Eurozone inflation, GDP

• EUR/JPY stays firmer for the second consecutive day, grinds near intraday top of late.
• Japan’s Industrial Production growth eases, retail numbers came in mixed for June.
• BoJ conducts the first special bond-buying since February, ECB’s Lagarde appears optimistic on economic growth.
• Preliminary readings of Eurozone inflation, GDP data will direct intraday traders.

EUR/JPY extends the previous day’s rebound from a six-week low while rising past the 156.00 hurdle, up 0.41% intraday near 156.15-20 heading into Monday’s European session. In doing so, the cross-currency pair justifies the weekend comments from European Central Bank (ECB) President Christine Lagarde, as well as mixed Japan data and the Bank of Japan’s (BoJ) latest action.

BoJ conducts the first special bond-buying since February on early Monday, worth 300 billion Yen, with a 5-10 year residual maturity. That said, the preliminary readings of Japan’s Industrial Production for June eased to 2.0% MoM versus 2.4% market forecasts and -2.2% previous readings while the YoY figures drop to -0.4% from 4.2% prior. Further, Retail Trade improved to 5.9% YoY in June but the seasonally adjusted (s.a.) figures slump to -0.4% from 1.3% marked in May versus 0.2% expected.

On the other hand, ECB President Christine Lagarde termed the latest economic output numbers from France, Germany and Spain as “quite encouraging” while speaking to French daily Le Figaro during the weekend. On Friday, Germany's Bundesbank President and ECB Governing Council member Joachim Nagel cited stubborn core inflation to defend the hawkish ECB policies while suggesting higher interest rates for longer.

Apart from Japan, Eurozone moves, optimism about China stimulus and upbeat yields also underpin the EUR/JPY run-up ahead of German Retail Sales and the first readings of the Eurozone inflation data for July, per the Harmonized Index of Consumer Prices, as well as the second-quarter (Q2) seasonally adjusted Gross Domestic Product (GDP).

On Friday, the EUR/JPY jumped as the Bank of Japan (BoJ) defied the market’s expectations of announcing an immediate tweak to its Yield Curve Control (YCC) policy by keeping the monetary policy measured unchanged. The Japanese central bank (BoJ), however, pledged to make YCC more flexible and drowned the JPY after an initial run-up in the Yen.

Following the monetary policy decision, Bank of Japan (BOJ) Governor Kazuo Ueda said that they “need to patiently continue monetary easing to support the economy.” BoJ’s Ueda also added that the decision is aimed at making YCC more sustainable. The same statement from BoJ Governor Ueda also got credence from Japanese Chief Cabinet Hirokazu Matsuno. It’s worth noting that BoJ’s Ueda showed readiness to take necessary steps if interest rates rise beyond 1.0%.

Technical analysis

EUR/JPY pair’s rebound from an upward-sloping support line from early May, around 153.40, aims for another battle with the one-month-old falling resistance line, close to 157.75 at the latest.