Edges higher to mid-160.00s, remains confined in weekly range

• EUR/JPY attracts buyers for the second straight day, albeit remains below the weekly top.
• The technical setup supports prospects for a breakout through the weekly trading range.
• A convincing break below the 159.00 mark is needed to negate the near-term positive bias.

The EUR/JPY cross trades with a positive bias for the second successive day on Wednesday, albeit lacks bullish conviction and remains confined in a familiar range held since the beginning of this week. Spot prices currently trade around mid-160.00s, up nearly 0.25% for the day and draw support from a combination of factors.

The shared currency benefits from the prevalent US Dollar (USD) selling bias, fueled by rising bets for more aggressive policy easing by the Federal Reserve (Fed). Apart from this, the prevalent risk-on environment undermines the safe-haven Japanese Yen (JPY) and acts as a tailwind for the EUR/JPY cross. That said, the divergent Bank of Japan (BoJ)-European Central Bank (ECB) policy expectations keep a lid on any meaningful appreciating move for the currency pair. 

From a technical perspective, the range-bound price action might be categorized as a bullish consolidation phase against the backdrop of the recent move-up witnessed over the past two weeks or so. Moreover, oscillators on the daily chart have just started gaining positive traction and support prospects for an eventual breakout to the upside. Bulls, however, need to wait for sustained strength and acceptance above the 161.00 mark before placing fresh bets. The EUR/JPY cross might then accelerate the move up to the 161.40-161.45 intermediate resistance en route to the 162.00 round figure. 

The next relevant hurdle is pegged near the 162.45-162.50 region, above which bulls could aim to challenge the monthly peak, around the 162.90 area. Some follow-through buying beyond the 163.00 round figure will negate the negative outlook and shift the near-term bias in favor of bullish traders. 

On the flip side, weakness back below the 160.00 psychological mark could find support near the 159.60-159.55 region ahead of the 159.00 round figure, or the lower boundary of the weekly range. A convincing break below the latter will suggest that the recent upward trajectory has run out of steam and drag the EUR/JPY cross further towards the 158.20 area. This is closely followed by the 158.00 round figure, below which spot prices could drop to mid-157.00s en route to the 157.00 mark.

EUR/JPY 4-hour chart