EUR/JPY intermarket: Support from yen and yields

EUR/JPY moved off daily highs during the American session and pulled back after being rejected from above 121.00. Again, the pair lost momentum after approaching the strong resistance located around 121.20. 

Earlier today, the upbeat US ADP employment report, that showed an increase in private payroll of 298K in February above the 190K expected, sent the Japanese yen sharply lower in the market. EUR/JPY jumped from 120.45 to 121.11. The rally stopped below last week highs. 

The yen tumbled after a sharp increase in US bond yields while the euro remain resilient. USD/JPY gained more than 50 pips after the report while EUR/USD dropped 20 pips initially only to recovery the lost ground later. 

The US 10-year bond yield reached 2.58% (highest since December 2016) from previous 2.51%  and the 5-year note yield advanced to 2.10% (highest intraday since August 2009). Yields continue to have a significant impact on the yen. 

On Wednesday, the European Central Bank will announce its decision on monetary policy. No change is expected. The statement and Draghi’s press conference could have an impact on the euro and also on European yields. 

EUR/JPY Technical outlook 

“The short term picture for the pair is now bullish, as in the 1 hour chart, the price accelerated its advance after breaking above the 100 SMA, whilst technical indicators remain well into positive territory, although with the RSI retreating from overbought readings”, said Valeria Bednarik, chief Analyst at FXStreet. 

According to her, the 4-hour chart technical indicators have lost their upward strength and turned modestly lower within positive territory, while moving averages remain horizontal below the current price. “At this point, the pair needs to advance beyond 121.40, a major Fibonacci resistance, to confirm additional gains during the upcoming sessions.”