• EUR/JPY meets with heavy supply on Friday and corrects sharply from a multi-year top.
• The disappointing Eurozone PMIs undermine the shared currency and exert pressure.
• The BoJ’s dovish outlook might continue to weigh on the JPY and limit further losses.

The EUR/JPY cross comes under intense selling pressure on Friday and snaps a two-day winning streak to its highest level since September 2008, around the 157.00 neighbourhood touched the previous day. The intraday downward trajectory picks up pace during the early European session and drags spot prices to a fresh daily low, around the 155.00 psychological mark in the last hour.

The shared currency takes a hit following the rather disappointing release of Eurozone PMI prints, which, in turn, is seen as a key factor behind the latest leg of a sudden drop for the EUR/JPY cross. In fact, S&P Global's preliminary report pointed to a sharp slowdown in business activity in France and Germany - the Eurozone's two largest economies. This comes on the back of worries about economic headwinds stemming from rapidly rising borrowing costs, which, to a larger extent, offsets the European Central Bank's hawkish outlook and does little to impress the Euro bulls.

The Japanese Yen (JPY), on the other hand, attracts some haven flows in the wake of the prevalent risk-off environment and is further underpinned by stronger domestic inflation data released earlier this Friday. In fact, Japan's Nationwide Core Consumer Price Index (CPI), which excludes fresh food but includes energy items, eased from 3.4% to 3.2% in May, though surpass market estimates. Furthermore, the gauge excluding fuel costs rose at the fastest annual pace in 42 years, highlighting that the underlying inflation remained heated and put pressure on the Bank of Japan (BoJ).

The Japanese central bank, however, recently reiterated that it has no plans to alter its ultra-loose policy. This marks a bid divergence in comparison to a more hawkish stance adopted by other major central banks, which might continue to undermine the JPY and help limit losses for the EUR/JPY cross. This, in turn, suggests that the ongoing corrective pullback is solely led by some long-unwinding heading into the weekend. Nevertheless, spot prices now seem to have erased a major part of the weekly gains. That said, any subsequent fall is more likely to attract fresh buyers and remain limited.

Technical levels to watch