EUR/JPY extends sideways grind in two-week-old range around 126.00

• EUR/JPY continues to have a tough time finding direction.
• Data from eurozone showed ongoing expansion in manufacturing sector.
• Upbeat market mood doesn't allow JPY to gather strength.

After closing in the negative territory on Tuesday, the EUR/JPY edged slightly higher on Wednesday and was last seen posting small daily gains at 126.08. However, the pair continues to fluctuate in a two-week-old range, suggesting that it struggles to make a decisive move in either direction.

Euro capitalizes on risk flows

Earlier in the day, the data from the eurozone showed that the business activity in the manufacturing sector continued to expand at a strong pace in December with the Markit Manufacturing PMI rising to 55.5 from 53.8 in November. Moreover, the Services PMI improved to 47.3 from 41.7 and helped the shared currency outperform its rivals.

Meanwhile, coronavirus vaccine rollout and renewed hopes for an EU-UK trade deal provided a boost to risk sentiment and made it difficult for the JPY to find demand as a safe-haven. Confirming the upbeat market mood, major European equity indexes gained between 0.6% and 1.5% on Wednesday.

On Thursday, the Eurostat will release the inflation report, which is expected to show that the Core Consumer Price Index (CPI) stayed unchanged at 0.2% on a yearly basis in November.

Technical levels to watch for