EUR/JPY struggles for direction below 2021 highs near 130.50

• EUR/JPY sheds some ground after reaching tops near 130.50.
• Higher US yields sustain the bid tone around the dollar.
• Investors shift their focus to the upcoming FOMC meeting.

The offered tone in the single currency prompted EUR/JPY to give away earlier gains to fresh 2021 highs in the 130.50 region.

EUR/JPY bid on JPY-selling

The persistent move higher in US yields sustain the increasing selling interest around the safe haven JPY and therefore underpin the rally in EUR/JPY to levels last traded in October 2018 beyond the key 130.00 hurdle.

The offered note surrounding the European currency reflects the investors’ preference for the dollar against the backdrop of the better performance of the US economy in the wake of the pandemic in combination with firm vaccine rollout and prospects of higher inflation later in the year.

Moving forward, market participants will closely follow the FOMC event on Wednesday, looking for any mention by Chief Powell of the recent performance in US yields and/or a potential revision of the interest rate path by the Committee.

EUR/JPY relevant levels

At the moment the cross is losing 0.08% at 130.17 and a drop below 128.79 (20-day SMA) would expose 128.18 (monthly high Mar.2) and finally 127.30 (low Feb.17). On the upside, the next resistance is located at 130.48 (2021 high Mar.15) followed by 131.00 (psychological level) and then 131.98 (2018 high Jul.17).