EUR/JPY renews four-year high below 135.00 as BOJ offers to purchase unlimited JGB

• EUR/JPY reverses the pullback from multi-day high, takes the bids to refresh multi-day top of late.
• BOJ offers to purchase unlimited 10-year JGBs at 0.25% rate.
• Soar sentiment tests the bulls but strong yields, risk-off mood challenges the downside momentum.

EUR/JPY cheers the Bank of Japan’s (BOJ) unlimited bond-buying offer by refreshing a four-year high near 134.80 during Monday’s Asian session. In doing so, the yen cross reverses the previous day’s pullback from the highest levels since February 2018.

Chatters over the BOJ intervention, due to the rally in the Japanese Government Bond (JGB) yields, proved right during Monday’s Asian session as the central bank recently offered to buy an unlimited amount of 10-year JGBs at 0.25%, as it did in 2015 when JGB yields rose near to 0.25%.

“The move came after the 10-year JGB yield crept up toward the implicit 0.25% upper limit the central bank sets around its 0% target,” said Reuters following the BOJ announcement.

Also underpinning the EUR/JPY prices are the firmer yields in the US and Europe, as well as recently hawkish comments from the European Central Bank (ECB). Policymakers from the ECB have recently been flashing signs of aggressive tightening despite trying to push back rate-hike concerns.

Elsewhere, fears emanating from Russia and China try to challenge the EUR/JPY bulls, due to the yen’s risk-safe appeal.

That said, the S&P 500 Futures drop 0.35% intraday, to 4,526 whereas the US 10-year Treasury yields retreat from a fresh three-year high, down 2.2 basis points (bps) to 2.471% at the latest, while portraying the risk-off mood.

Looking forward, headlines concerning the Russia-Ukraine story will join coronavirus updates to direct short-term market moves.

Technical analysis

EUR/JPY buyers keep reins inside a two-week-old rising channel, between 136.15 and 133.80 by the press time.