EUR/JPY continues to rise amid Lagarde’s comments

• The EUR/JPY rose to its highest level since August 2008 to 157.93.
• Christine Lagarde mentioned additional hikes during the ECB’s Sintra Forum in Portugal.
• Overbought conditions and falling US yields limit the JPY losses.

On Tuesday, the EUR/JPY continued gaining ground, now jumping to a 15-year high of around 157.93. In that sense, hawkish European Central Bank’s (ECB) president Christine Lagarde, fueled a rise in German bond yields supporting the Euro. On the other hand, investors monitor the USD/JPY for a potential Bank of Japan (BoJ) intervention which could bolster the yen. In addition, strong US data weakened US yields which could also limit the Yen’s losses.

Hawkish Lagarde and rising German yields favour the Euro

During the ECB forum on Tuesday, ECB’s Lagarde commented that inflation in the eurozone is still too high and that interest rates are to remain high as long as necessary. Other officials also hinted at additional hikes as Mārtiņš Kazāks commented that he sees rates being hiked in July. As a reaction, German bond yields rose, with the 2-year bond yield leading the way, rising more than 1% to 3.18%. As rising bond yields attract investors, the Euro currency found demand and gained appeal.

That being said, the Yen may find on the prospects of a BoJ intervention if the Japanese currency continues to lose value against the USD. Focus now shift to Wednesday’s Jerome Powell speech in the ECB forum, where investors will look for clues regarding the Federal Reserve's (Fed) next steps, which could affect the mentioned pair price dynamics and hence the Yen. It’s worth noticing that Housing and Durable Goods from May and April came in above expectations on Tuesday so that investors will put an eye on Powell’s analysis in the economic activity outlook.

EUR/JPY Levels to watch

According to the daily chart, the cross holds a bullish outlook for the short-term but a correction shouldn’t be taken off the table as indicators; specifically, the Relative Strength (RSI), has stood in overbought territory since mid-June.

In case of a technical correction, support levels line up at 157.00, 156.50 and 156.00, the nearest round levels. On the flip side, resistances line up at 158.00, 158.50 and 159.00.

 

EUR/JPY Daily chart