EUR/JPY hovers around seven-year high of 142.00 on downbeat German data, ECB eyed

EUR/JPY pares intraday gains around 142.00, the highest level in seven years, after German data probed buyers during the initial hour of the European session on Tuesday. Even so, firmer US Treasury yields and hawkish expectations from Thursday’s ECB keep buyers in the driver’s seat.

Germany’s Factory Orders for April slowed down to -2.7% MoM and -6.2% YoY, versus -4.2% and -3.1% respective priors. On the contrary, Japan’s Coincident Index and Leading Economic Index for April flashed mixed numbers as the former eased below 97.5 forecast to 96.8 while the latter rose beyond 100.8 to 102.9.

Although the German data challenges the recent hawkish rhetoric among the European Central Bank (ECB) policymakers, record-high inflation in the bloc pushes the policymakers towards a rate hike. The same propels the regional currency Euro ahead of Thursday’s ECB.

On the other hand, strong yields weigh on the Japanese yen (JPY) even as the Bank of Japan (BOJ) Haruhiko Kuroda tried to limit the JPY weakness with statements like, “An exit will be discussed once the stable inflation goal has been met.”

It’s worth noting that the north-run in the Treasury yields could be linked to the global central banks’ rush towards tighter monetary policies. On Tuesday, the Reserve Bank of Australia (RBA) surprised markets with a higher-than-expected rate hike of 0.50%.

Amid these plays, the US 10-year Treasury yields rise for the seventh consecutive day to 3.045%, up 0.5 basis points (bps), whereas the US S&P 500 Futures drop 0.60% intraday by the press time.

Looking forward, the return of the full markets and the ECB’s reaction to the record-high inflation will be crucial for EUR/JPY traders.

Technical analysis

Although the overbought RSI conditions hint at the EUR/JPY pair’s further pullback, bulls keep reins until the quote stays beyond April’s peak of 140.00. That said, a four-month-old ascending trend channel directs the bulls towards 144.50 hurdle.