EUR/JPY consolidates weekly losses below 156.00 as markets await ECB, BoJ

• EUR/JPY clings to mild gains during the first positive day in four, stays defensive at the lowest level in a week.
• Lackluster yields, mixed sentiment and ECB positioning allow cross-currency pair to trim latest losses.
• ECB could follow Fed with 0.25% rate hike but the odds of dovish hike and further Euro weakness are high.
• IMF’s urge to BoJ, increasing inflation pressure allow JPY buyers to remain hopeful despite likely inaction of Japanese central bank.

EUR/JPY portrays the typical pre-data consolidation during early Thursday as it prints the first daily gains in four around 155.60 while bracing for the European Central Bank (ECB) Interest Rate Decision. Also important will be the Bank of Japan (BoJ) monetary policy decision, scheduled for Friday. It should be noted that a pause in the Treasury bond yields also contributed to the cross-currency pair’s latest rebound.

That said, the US 10-year and two-year Treasury bonds declined the previous day after the Federal Reserve (Fed) failed to impress markets with a 0.25% rate hike and showed readiness for the September rate hike. That said, the benchmark 10-year bond coupon seesaws near 3.87% while the two-year counterpart makes rounds to 4.86% by the press time.

Additionally, downbeat outcomes of foreign investments into Japanese stocks and bonds during the week ended on July 21 also put a floor under the EUR/JPY price.

On Wednesday, an anonymous Japanese government official quoted Bank of Japan (BoJ) Governor Kazuo Ueda as defending the yield curve control (YCC) policy when it comes to the stability of Japan's long-term yield rate. BoJ’s Ueda was also said to show the BoJ’s readiness to maintain an accommodative monetary environment for firms.

Further, the Japanese Cabinet Office published its monthly economic assessment portraying an upbeat picture of the business sentiment.

However, the International Monetary Fund (IMF) warned of higher inflation from Japan and urged the Bank of Japan (BoJ) to exit its easy-money policy.

It’s worth noting that the mildly bid S&P500 Futures and Japan’s Nikkei suggest cautious optimism in the market and also underpin the EUR/JPY rebound.

Moving on, the ECB is expected to follow the Fed while announcing a 0.25% increase in the benchmark interest rates. However, President Christine Lagarde’s ability to defend the hawks will be crucial to allow the Euro in staying firmer.

Technical analysis

A seven-week-old rising support line restricts immediate EUR/JPY downside near 155.55 but major attention is given to the latest swing low of around 153.40 due to the double tops marked near 158.00.