EUR/JPY plummets below 142.00 as BOJ chatters push back ECB hawks

• EUR/JPY stands on slippery grounds as it snaps four-day uptrend.
• Upbeat BOJ economic assessment favors previous hawkish calls to exit easy money policy.
• ECB policymakers back further rate hikes to ward off the inflation risks.

EUR/JPY takes offers to refresh the intraday low near 141.50 heading into Thursday’s European session. In doing so, the cross-currency pair fails to justify the hawkish bias among the European Central Bank (ECB) policymakers as talks of the Bank of Japan’s (BOJ) exit from the easy money policy gain momentum.

Recently, the BOJ raised its economic assessment for four of the country’s nine regions in a quarterly report. In doing so, the Japanese central bank maintained its assessment of the remaining five regions. “Many regions saw their economies pick up, or pick up moderately,” the BOJ said in the quarterly report.

Given the firmer economic assessments, calls for the BOJ’s push for restrictive monetary policy, after tweaking the Yield Curve Control (YCC) in the last meeting, gain major attention and favor the EUR/JPY bears. Earlier in Asia, Japanese media Yomiuri stated that the BOJ will review the side effects of its massive monetary easing at its policy meetings next week.

On the other hand, ECB policymaker Robert Holzmann stated that rates will have to rise significantly further to reach levels that are sufficiently restrictive to ensure a timely return of inflation to target. On the same line, the ECB Governing Council member and French central bank governor Francois Villeroy de Galhau said, “ECB should aim to reach the terminal rate by the summer.” Furthermore, ECB member Olli Rehn said that rates in the Euro Zone will still have to rise significantly in the next couple of meetings and reach restrictive levels to dampen inflation.  

Amid these plays, the yields remain downbeat but the stock futures are cautiously optimistic as traders await this week’s key catalyst, namely the US Consumer Price Index (CPI) for December.

Technical analysis

A clear downside break of the one-week-old ascending trend line, now resistance around 142.35, directs EUR/JPY towards the 200-DMA level surrounding 140.70.