EUR/JPY: Bulls at a crossroads, focus switches to central banks

• EUR/JPY has risen to the top of the rising wedge's resistance.
• The ECB and BoJ will be in focus at this juncture. 

EUR/JPY has been testing the topside of a rising wedge formation ad could be prone to sell-off if the price fails to the upside at this juncture. EUR/JPY is currently trading at 122.74, stuck within a range of between 122.64 and 122.76 in early Asia.

EUR/JPY rose steeply at the start of the month and has made fresh highs this week, extending the bull recovery from the mid-summer 2019 lows down at 115.86. 
While global trade seems to be back on track, optimism at least, there is attention being paid to central banks once again. 

Central banks in focus

The minutes of the ECB December meeting suggest that the central bank has returned to harmony or, at least, is trying to keep controversies behind closed doors, analysts at ING bank describe:

"Looking forward, the strategy review could be the most excitement we will get from the ECB this year. It increasingly looks as if the ECB will stay on hold throughout the entire year. As long as the eurozone economy moves rather horizontally and some governments start to step up fiscal stimulus, there will be no need to alter the monetary policy stance."

As for the Bank of Japan, it is left with no policy ammunition. "Japan's central bank is probably banking on $120 billion of fiscal stimulus announced in December to soften the impact of the recent consumption tax hike," the analysts at ING bank argued. 

EUR/JPY levels

Meanwhile, the technical picture is quite complex. The bulls are in charge, although while holding above the 200-day moving average, the 123 handle could be a tough nut to crack considering the rising wedge resistance. Analysts a Commerzbank also note that EUR/JPY continues to probe the Fibonacci resistance at 122.63 (the61.8% retracement of the move down from the April 2019 peak):

"We will need to see a close above here to confirm a break and while capped by122.65 (December 2019 high) we will assume a negative bias is entrenched. For now, we have no strong bias. The recent low at 120.17 needs to give way for us to refocus attention on the 119.26 mid-November low. Failure here would be considered to be negative and this will target the 115.87 September low (favoured)."