EUR/JPY retreats towards 155.00 despite hawkish ECB

On Monday, the EUR/JPY retreated to the 155.00 area as traders seem to be correcting overbought conditions following last week’s impressive gains. However, the European Central Bank (ECB) hawks hint at more rate hikes and limited the Euro’s losses, while investors await Bank of Japan (BoJ) minutes in the early Asian session on Tuesday.

ECB hawks signalled another hike in July

On Monday, Phillip Lane from the ECB was on the wires and stated that another hike in July may be appropriate but opened the door for a pause in the following meeting stating, “then we’ll see on September” and argued that the bank needs to be data-dependent about the inflation outlook. Elsewhere, Isabel Schnabel cited that inflation risks are tilted to the upside and that she prioritizes doing “too much” over doing “too little”.

As a reaction, German bond yields are rising, with the 10-year rate standing at 2.51% and the 2-year yielding 3.22%, with both seeing more of a 1% gain.

On the other hand, the Bank of Japan (BoJ) is scheduled to publish the minutes of its Friday meeting on Tuesday. This release will provide investors with a clearer understanding of the bank's position on its ultra-loose monetary policy, which could influence the value of the Yen.

EUR/JPY Levels to watch

Despite the downward correction, the upside bias is still intact for the pair. Technicals still favour the Euro over the Yen while the pair trades above its main Simple Moving Averages (SMAs) of 20, 100 and 200 days.

Support levels to watch:154.50, 154.00, 153.50
Resistance levels to watch:155.20, 155.50, 156.00

EUR/JPY Daily chart