• The euro returns above 130.00 and retraces most of the late February sell-off.
• Risk appetite and higher US yields are hurting the Japanese yen.
• EUR/JPY is now aiming to 130.30 and 130.75.

The euro has extended its uptrend against the Japanese yen on Wednesday, breaching the 130.00 psychological level to hit fresh 3-week highs at 130.55.

The euro keeps rallying against a weak yen

The common currency has appreciated nearly 5% over the last week. The pair has managed to retrace most of the sell-off seen in late February, following a sell-off to 16-month lows at 124.40 area.

The moderate risk appetite witnessed over the last sessions on hopes of a Russia - Ukraine agreement to stop the war and China's announcement of fresh stimulus measures to support economic growth have fuelled the euro's recovery against the safe-haven yen.

Beyond that, hopes of a Federal Reserve rate hike later on Wednesday and the increasing yields differential between the US and Japan have been hammering the yen during the last week.

EUR/JPY: Next upside targets are 130.30 and 130.75

From a technical point of view, the pair has confirmed above the 61.8% Fibonacci retracement of the February-March decline, at 129.80. Now the near-term focus is set at 130.30, (February 25 and 28 highs) and 130.70 (February 28 high)

On the downside, a potential correction would look for support at 128.80 (March 2, 10 highs) before testing later January lows at 128.25 and 127.40 (March 10 low).

Technical levels to watch