• EUR/JPY fades two-day rebound from amid mixed concerns.
• Sluggish sentiment, pre-data anxiety challenge buyers but monetary policy divergence favors upside momentum.
• Risk catalysts from Russia, China are also important for near-term direction.

EUR/JPY remains sidelined, recently easing from the daily top to 137.40, while fading the recent recovery moves heading into Friday’s European session.

The cross-currency pair’s latest pullback could be linked to the mixed headlines concerning the risk appetite, as well as an off in Japan. It’s worth noting, however, that the pair gains major attention amid the riskier markets, especially ahead of the preliminary Gross Domestic Production (GDP).

Japan celebrates Showa Day Holiday and restricts bond moves in Asia, which in turn challenges the EUR/JPY prices. Also testing the pair traders is the indecision among the Euro buyers and yen sellers as market sentiment dwindles.

The reason could be linked to the recently mixed comments from the ECB policymakers and fears of the economic fallout of the bloc due to the Russian invasion of Ukraine. However, the Bank of Japan’s (BOJ) double-down on easy money keeps the monetary policy divergence between the BOJ and the European Central Bank (ECB), which in turn favor the EUR/JPY bulls.

Moving on, the initial readings of German and Eurozone GDP for Q1 2022 will be the key for EUR/JPY traders. the Eurozone Gross Domestic Product (GDP) is likely to improve to 5.0% YoY versus 4.6% prior, per the seasonally adjusted Q1 2022 figures. For Germany, the YoY GDP Figures may rise to 3.6% versus 1.8% prior.

Should the bloc manages to print upbeat growth numbers, the buyers can keep the reins as equities in the US and Asia seems to underpin the early optimism in Europe. However, concerns over the bloc’s economic growth and oil embargo on Russia may limit the quote’s upside moves.

Technical analysis

Unless providing a daily closing below an upward sloping trend line from March 25, around 135.55 by the press time, EUR/JPY remains on its way to the 140.00 key hurdle comprising the monthly high and a two-month-old previous support line.