CFD Trading Rate Euro vs Japanese Yen (EURJPY)

• EUR/JPY extends the rally near 163.15 amid the risk-on mood in Monday’s early European session. 
• Kyodo News agency reported Japanese government is considering announcing an end to deflation, raising the possibility of policy tightening.
• ECB is expected to leave the interest rate unchanged at its March meeting on Thursday. 
• Japan’s February Consumer Price Index (CPI) on Tuesday will be a closely watched event ahead of the ECB rate decision. 

The EUR/JPY cross holds above the 163.00 mark during the early European session on Monday. The risk-on environment in the market provides some support to the Euro (EUR) and creates a tailwind for the EUR/JPY cross. Nonetheless, the possibility that the Bank of Japan (BoJ) will shift its monetary policy stance might cap further losses of the Japanese Yen (JPY). At press time, EUR/JPY is trading at 163.15, gaining 0.26% on the day. 

A growing speculation that the BOJ will change its monetary policy path, which might lift the Japanese Yen (JPY). The BoJ policymaker Hajime Takata signaled the exit of its ultra-loose monetary policy as the central bank is on the path of achieving the 2% inflation target. Furthermore, the Japanese government is considering announcing an end to deflation, according to the Kyodo News agency. This flagged the heightened risks of policy tightening.

On the Euro front, the European Central Bank (ECB) is expected to maintain the interest rate steady at its March meeting on Thursday, as ECB policymakers want to see additional evidence that recent falls in inflation will be sustained. According to the minutes of the ECB in January, the policymakers highlighted that continuity, caution, and patience were still needed. Additionally, the ongoing geopolitical tensions in the Middle East might raise the fear that inflation could rebound, which could delay the speculation about rate cuts from the ECB. 

Market players will keep an eye on the Japanese Consumer Price Index (CPI) for February, due on Tuesday. The Eurozone Retail Sales will be released on Wednesday. The attention will shift to the ECB interest rate decision on Thursday as well as the ECB Press Conference. Traders will take cues from the data and find trading opportunities around the EUR/JPY cross. 

• EUR/JPY could meet the psychological resistance at the 163.00 level following February’s high at 163.72.
• EUR/JPY cross could find immediate support at the major level of 162.50.
• 14-day RSI indicates a bullish sentiment for the cross.

EUR/JPY retraces its recent losses, trading higher around 162.70 during the Asian session on Friday, following the psychological barrier of 163.00 level. A breakthrough above this barrier could lead the cross to explore the further resistance zone around the major level of 163.50 followed by February’s high at 163.72.

Technical analysis indicates a bullish sentiment for the EUR/JPY cross. The 14-day Relative Strength Index (RSI) is positioned above the 50 mark, signaling strength in the upward momentum.

However, the Moving Average Convergence Divergence (MACD) line is aligned with the signal line, indicating a convergence, while remaining above the centerline. Although the MACD is a lagging indicator, this configuration suggests a subdued momentum for the EUR/JPY cross at the moment.

On the downside, the EUR/JPY cross may encounter immediate support at the major level of 162.50, followed by the psychological level of 162.00. A breach below this support level could exert downward pressure on the pair, potentially testing the 21-day Exponential Moving Average (EMA) at 161.86.

Additionally, a further support zone for the EUR/JPY cross is anticipated around the major level of 161.50, with another significant support level near the 23.6% Fibonacci retracement level at 161.23.

EUR/JPY: Daily Chart

• EUR/JPY falls 0.80% to 162.00, reacting to BoJ's hawkish comments and soft EU inflation data.
• Technical analysis indicates crucial support and resistance levels, highlighting immediate market sensitivities.
• Further decline eyed with key supports at 161.75 and 161.00, unless buyers reclaim higher resistance points.

The EUR/JPY snaps two days of gains and drops on Thursday, following hawkish remarks by a Bank of Japan (BoJ) official. That and soft inflation data from countries in the Eurozone (EU) area are driving the cross-pair price action ahead of the Wall Street close. At the time of writing, the pair exchanged hands at 162.00, down 0.80%.

EUR/JPY Price Analysis: Technical outlook

The pair fell below 162.59, the Tenkan-Sen level, and slumped below the 162.00 figure, hitting a daily low of 161.68. However, the EUR/JPY recovered and reclaimed 162.00, though downside risks remain. If sellers achieve a daily close below 162.00, further weakness lies ahead. The next support would be the Senkou Span A at 161.75, followed by the 161.00 mark, and the Kijun Sen at 160.90.

Conversely, if buyers stepped in, stir resistance lies at 164.00, but firstly, they need to conquer the Tenkan-Sen at 162.59 before the 163.00 mark.

EUR/JPY Price Action – Daily Chart

• EUR/JPY depreciates by around 0.62% after BoJ’s hawkish signal on Thursday.
• BoJ’s Hajime Takata hinted at the possibility of exiting from monetary stimulus measures.
• The Euro receives downward pressure following subdued data from the Eurozone on Wednesday.

EUR/JPY drops to near 162.30 during the Asian session following hawkish signals from Bank of Japan (BoJ) board member Hajime Takata on Thursday. Takata emphasized the necessity for the BoJ to contemplate flexible responses, including the possibility of exiting from monetary stimulus measures.

BoJ’s Takata noted that the achievement of the 2% inflation target is coming into view despite uncertainties in the economic outlook. Exit measures under consideration would involve abandoning the yield curve control framework, discontinuing negative interest rates, and revisiting the overshoot commitment. It is essential to consider the balance between the effectiveness of easing measures and their potential side effects. Furthermore, Takata highlighted that the economy is transitioning into a phase characterized by rising wages and prices, moving away from the chronic deflationary cycle.

Furthermore, the Japanese Yen (JPY) could receive support due to concerns about potential intervention by Japanese authorities, which in turn undermines the EUR/JPY cross. Masato Kanda, Japan's vice finance minister for international affairs, stated that the government is prepared to take appropriate action against excessive exchange-rate movements and volatility.

In other economic news, Japanese Retail Trade year-over-year expanded by 2.3% in January, meeting expectations and slightly down from the previous increase of 2.4%. Additionally, the seasonally adjusted month-over-month data surged by 0.8%, reversing the previous decline of 0.8%.

The Euro (EUR) encountered difficulties following disappointing data from the Eurozone on Wednesday. Economic sentiment declined in February, dropping from 96.1 to 95.4, which fell short of estimates for an improvement to 96.7. Similarly, Consumer Confidence revealed an economic downturn with a consistent reading of -15.5 as expected.

Moreover, market participants are likely awaiting a barrage of key economic data from Germany, including Retail Sales, Consumer Price Index, and Unemployment data on Thursday.

• EUR/JPY trades on a softer note around 163.05 in Wednesday’s early European session.
• The positive outlook of the cross remains intact above the key EMA; RSI indicator supports the bullish momentum.
• The immediate resistance level is seen at 163.21; the key support level is located at the 162.60–162.70 zone.

The EUR/JPY cross finds support above the 163.00 psychological figure during the early European trading hours on Wednesday. The upbeat Japanese inflation data for January surprised the upside and sparked speculation that the Bank of Japan (BoJ) will exit negative interest rates by June this year. This, in turn, lifts the Japanese Yen (JPY) and weighs on the EUR/JPY cross. The cross currently trades near 163.05, down 0.09% on the day. 

Technically, EUR/JPY maintains the bullish bias unchanged as the cross holds above the 50- and 100-period Exponential Moving Averages (EMA) on the four-hour chart. The upward momentum is supported by the Relative Strength Index (RSI), which lies above the 50-midline, indicating the path of least resistance is to the upside. 

A high of February at 163.21 acts as an immediate resistance level for EUR/JPY. Further north, the upper boundary of the Bollinger Band at 163.60 will be the next upside barrier. A bullish breakout above this level will pave the way to a psychological mark at 164.00. 

On the flip side, the crucial support level will emerge at the 162.60–162.70 region, portraying the confluence of the lower limit of the Bollinger Band and the 50-period EMA. The additional downside filter to watch is the 100-period EMA at 161.90. The next contention level is seen at a low of February 15 at 160.91, followed by a low of February 12 at 160.38.

EUR/JPY four-hour chart

• EUR/JPY faces a 0.17% decline as Japan's core inflation rise hints at a possible end to negative interest rates.
• Technical patterns, including a 'bearish harami', suggest further downside, with key levels to watch at 162.56 and 162.00.
• Recovery above 163.00 could open the path to 164.00, contingent on overcoming resistance near the week's high at 163.72.

The EUR/JPY is dropping late in the North American session, set to register losses of around 0.17% on Tuesday. A rise in core inflation in Japan sparked speculation that the Bank of Japan (BoJ) could increase interest rates, ending the negative interest rate cycle. Therefore, the cross-pair trades at 163.22 after hitting a daily high of 163.52.

EUR/JPY Price Analysis: Technical outlook

From a technical standpoint, the EUR/JPY failed to extend its rally and edged lower. Nevertheless, price action is well contained within the boundaries of Monday’s price action, which would form a ‘bearish harami’ candlestick chart pattern, suggesting that further downside is expected.

If the EUR/JPY tumbles below 163.00 and decisively breaks below the February 26 low of 162.56, that would exacerbate a test of the 162.00 mark, but on its way south, sellers will face the Tenkan-Sen at 162,31.

Conversely, if buyers keep the exchange rate above 163.00, the EUR/JPY could edge higher above the current week's high at 163.72, which could pave the way for testing the 164.00 mark.

EUR/JPY Price Action – Daily Chart

• EUR/JPY attracts some sellers near 163.28 on the stronger-than-expected Japanese inflation data. 
• Japan’s two-year bond yield climbed to the highest level since 2011 amid growing speculation the BoJ will abandon its negative rate policy by spring. 
• ECB’s Lagarde reaffirmed its restrictive policy stance, as the decline in headline inflation acts as a safeguard against a sustained wage-price spiral.

The EUR/JPY cross trades in negative territory after being rejected from the multi-month highs of 163.50 during the early European trading hours on Tuesday. The hotter-than-expected Japanese CPI data has prompted investors to be more cautious about the probability of the BOJ exiting negative interest rate policy at the March meeting, which provides some support to the Japanese Yen (JPY). At press time, the cross is trading at 163.28, losing 0.15% on the day. 

The Japanese government bond (JGB) yields edge higher on Tuesday after Japan’s inflation data surprised to the upside, raising speculation that the Bank of Japan (BoJ) will exit negative interest rates by June this year. This, in turn, boosts the Japanese Yen and acts as a headwind for the EUR/JPY cross. 

Early Tuesday, the Japan Statistics Bureau revealed that the nation’s National Consumer Price Index (CPI) for January came in at 2.2% YoY from 2.6% in December. Meanwhile, the National CPI ex Fresh food came in better than expected, arriving at 2.0% YoY in January versus 2.3% prior.

On the Euro front, European Central Bank (ECB) President Christine Lagarde said on Monday that inflation continues to ease toward central bank targets. However, the ECB remains committed to restrictive policy measures for the time being. Lagarde added that the fourth-quarter wage growth numbers are positive, but not enough to give the ECB confidence that inflation has been conquered.  

Investors will take more cues from the German Consumer Price Index (CPI) and Eurozone Harmonized Index of Consumer Prices this week for fresh impetus. On the Japanese docket, the Industrial Production will be due on Thursday and the Unemployment Rate will be released on Friday. 

• EUR/JPY climbs, leveraged by JPY's broad decline on Japan's cooling economy and inflation forecasts.
• Technical momentum suggests a test of the 164.00 level, with potential resistance at November's peak.
• Initial support at 163.00, with further downside targets including Tenkan-Sen and Senkou Span A levels.

The EUR/JPY advances sharply and regains the 163.00 figure as traders capitalize on the broad Japanese Yen (JPY) weakness. The latest fundamental news from Japan is that its economy is cooling, while inflation is expected to get below the Bank of Japan's (BoJ) 2% goal on its core figures. At the time of writing, the pair exchanged hands at 163.55, up 0.42%.

From a technical perspective, EUR/JPY rose to a new year-to-date (YTD) high at 163.72, though the exchange rate retreated somewhat amid fears that Japanese authorities might intervene in the Forex markets. Given the backdrop, the uptrend remains intact, and the pair could challenge the 164.00 figure in the near term. A breach of that level would expose the November 16 high at 164.31, followed by the 165.00 mark.

On the flip side, the EUR/JPY first support would be the 163.00 figure. If sellers push the spot price below Monday’s low of 162.56, look for a deeper pullback past the Tenkan-Sen at 162.31 as bears eye the Senkou Span A at 161.61 before the Kijun-Sen at 160.90.

EUR/JPY Price Action – Daily Chart

• EUR/JPY trades on a weaker note around 162.85 in Monday’s early European session. 
• ECB's Stournaras said the central bank won’t have enough data to decide on rate cuts until June. 
• A technical recession in Japan might prompt the BoJ to delay an exit from negative rates, which exerts some pressure on the JPY. 

The EUR/JPY cross holds below the 163.00 mark during the early European session on Monday. The concern about a technical recession in Japan and the risk-on mood weigh on the Japanese Yen (JPY). However, the warning from Japanese authorities to intervene in the FX market might cap the downside of the JPY. The cross currently trades near 162.85, down 0.01% on the day. 

The European Central Bank (ECB) Governing Council member Yannis Stournaras said on Friday that the central bank won’t have enough data to decide on interest-rate cuts until June, despite inflation seeming to be on pace to reach the 2% target this year. Meanwhile, ECB policymaker Mario Centeno said the central bank might be ready to consider cutting rates next month, if data call for it, even if that’s only a low-probability event. That being said, the divergence of monetary policy between the ECB and the Bank of Japan (BoJ) provides some support to the Euro (EUR) and acts as a headwind for the EUR/JPY cross. 

On the other hand, Japan entered a technical recession as its Gross Domestic Product (GDP) unexpectedly contracted for two consecutive quarters and surrendered its position as the world's third-largest economy to Germany. The weaker GDP growth number might convince the BoJ to delay an exit from negative rates. This, in turn, drags the JPY lower against its rivals.

However, verbal intervention from the Japanese authorities might lift the JPY. Japan's Finance Minister Shunichi Suzuki said last week that the government is closely watching FX moves with a high sense of urgency. 

The Japan’s Consumer Price Index (CPI) for January will be due on Tuesday. On Thursday, the German Retail Sales and CPI data will be released. The attention will shift to the Eurozone Harmonized Index of Consumer Prices (HICP) data on Friday. Traders will take cues from the data and find trading opportunities around the EUR/JPY cross. 

 

• EUR/JPY finishes week with a 0.66% gain, reflecting persistent JPY softness against a backdrop of economic data.
• Technical analysis shows YTD high at 163.21, with support and resistance levels indicating potential upward momentum.
• Key technical levels outlined for potential reversals or further advances in the EUR/JPY pair's trajectory.

The EUR/JPY wraps up Friday session with losses of 0.02% but is set to finish the week with 0.66% gains, courtesy of overall Japanese Yen (JPY) weakness, as economic data doesn’t justify the Bank of Japan (BoJ) finishing negative interest rates. At the time of writing, the cross exchanges hands at 162.86, virtually unchanged.

From a technical standpoint, the pair printed a new year-to-date (YTD) high at 163.21 but failed to cling to gains above the 163.00 figure. That opened the door for a pullback, capped at around the day’s low of 162.64, which keeps buyers hopeful of higher prices. Achieving a daily close above 163.00 would open the door to testing the November 27 high at 163.72, ahead of the 164.00 mark.

Conversely, if sellers step in, they would clash with the Tenkan-Sen, first support at 162.11. the next support will emerge at January’s 19 high turned support at 161.87, followed by the Senkou Span A at 161.44.

EUR/JPY Price Action – Daily Chart

• EUR/JPY gains ground near 163.07 in Friday’s early European session. 
• German GDP growth numbers contracted 0.3% QoQ and 0.2% YoY in Q4. 
• The verbal intervention by Japanese authorities and the rising Middle East geopolitical tensions might cap the JPY’s downside. 
• Investors will monitor the German IFO survey for February and the ECB's Schnabel speech on Friday. 

The EUR/JPY cross extends its upside near the 163.00 psychological barrier during the early European session on Friday. The pair edges higher after the German GDP growth number for Q4 matched the market estimation. The cross currently trades around 163.07, gaining 0.12% on the day. 

The latest data from the Federal Statistics Office of Germany on Friday showed that the German Gross Domestic Product for the fourth quarter (Q4) contracted by 0.3% QoQ and 0.2% YoY in Q4. Both figures were in line with market expectations. 

On Thursday, the Eurozone Composite PMI for February came in higher than the consensus forecast, improving to 48.9 from 47.9 in January. The improvement in the Composite PMI was primarily due to an increase in the services PMI, which climbed to 50.0 in February from 48.4 the previous month. The Manufacturing PMI declined to 46.1 in February from 46.6 in January, worse than the expectation of 47.0. This report suggests that the Eurozone manufacturing sector remained in deep contraction territory in the first quarter of 2024. 

The minutes of the European Central Bank’s (ECB) January meeting illustrate the currently ongoing shift in the ECB’s inflation assessment, but the very cautious and gradual shift suggests that rate cuts in spring are highly unlikely. Instead, the ECB will want to wait until first-quarter data confirms receding inflationary pressure, a modest economic recovery, and no acceleration of wage growth to slightly reduce the current monetary policy restrictiveness. 

On the other hand, the verbal intervention by Japanese authorities might cap the downside of the Japanese Yen (JPY). Japan's Ministry of Finance and Bank of Japan (BoJ) governor have warned that they are closely watching the FX rate and would intervene in the market to prevent further weakening in the home currency if needed. Additionally, the escalating geopolitical tensions in the Middle East might boost the safe-haven currency JPY and act as a headwind for the EUR/JPY cross. 

Moving on, market participants will focus on the German IFO survey for February and ECB's Schnabel speech, due on Friday. Next week, the Japanese National Consumer Price Index (CPI) will be released. 

• EUR/JPY climbs 0.18%, buoyed despite optimism for ECB rate cuts in a disinflationary environment.
• Crossing Tenkan-Sen, targets 163.00 resistance, aiming for November's peak at 164.31 in ongoing uptrend.
• Potential pullback to find support at Tenkan-Sen (161.92), with subsequent supports at 161.34 and 160.77.

The Euro clings to decent gains versus the Japanese Yen late during the North American session, amid a mixed market mood. Eurozone (EU) economic data showed the disinflation process amongst countries in the bloc continued and has opened the door to discussions that the European Central Bank (ECB) might cut rates sooner rather than later. At the time of writing, the EUR/JPY exchanges hands at 162.91, up 0.18%.

The cross-pair has extended its gains past the Tenkan-Sen level and the 162.00 figure, as the Relative Strength Index (RSI) is close to entering overbought levels. However, as the uptrend remains strong, the RSI might get to the 80 level before the EUR/JPY tumbles. Therefore, the pair’s next resistance level sits at 163.00, followed by the November 16 high at 164.31.

On the flip side, if EUR/JPY retreats below the 162.00 mark, sellers could challenge the Tenkan-Sen at 161.92. Once cleared, the next support would be the Senkou Span A at 161.34 before challenging the Kijun-Sen level at 160.77.

EUR/JPY Price Action – Daily Chart

• EUR/JPY attracts some buyers near 162.80 in Thursday’s early European session.
• Japanese authorities came with a verbal intervention, which might lift the JPY. 
• ECB’s Wunsch said the ECB may not cut the interest rate as quickly as some expect.

The EUR/JPY cross gains momentum for the third consecutive week during the early European trading hours on Thursday. However, the potential intervention in the market by the Japanese authorities might boost the Japanese Yen (JPY) and cap the upside of the EUR/JPY cross. At press time, EUR/JPY is trading at 162.80, gaining 0.19% on the day. 

On Thursday, Japanese Finance Minister Shunichi Suzuki and Bank of Japan (BoJ) Governor Kazuo Ueda made a verbal intervention, saying that they will monitor the foreign exchange moves with a high sense of urgency. This, in turn, might lift the JPY for the time being. Apart from this, the ongoing geopolitical tensions in the Middle East might support safe-haven assets like the Japanese Yen. 

On the Euro front, European Central Bank (ECB) Governing Council member Pierre Wunsch said that the ECB may not cut the interest rate as quickly as some expect. Investors increased their bet on an ECB rate cut as soon as April, but many policymakers signaled that the June meeting looks more likely as additional data will be available then. 

Traders will monitor the preliminary HCOB PMI from Germany and the Eurozone for February. Also, the Consumer Price Index (CPI) from Italy and the Eurozone will be released. On Friday, the German Gross Domestic Product (GDP) for Q4 will be published. Market players will take cues from the data and find trading opportunities around the EUR/JPY cross. 

• EUR/JPY ascends to 162.47, marking a continuous rise influenced by recent Fed monetary policy insights.
• Technical analysis points to key resistance levels, with 163.00 and 163.72 as immediate targets.
• Potential pullback could see support tests at 161.48 and 160.91, depending on market dynamics.

The Euro extended its gains for the second straight day against the Japanese Yen and is up by 0.22% as the EUR/JPY trades at 162.47 late during the North American session.

The release of the latest Federal Reserve (Fed) minutes sponsored a leg-up in the EUR/JPY as the EUR/USD edged slightly up. From a technical standpoint, the pair is trading at year-to-date (YTD) highs, aiming to extend its gains. The first resistance would be the 163.00 figure, followed by the November 27 high at 163.72. A further upside is seen at 164.00, followed by last year’s high at 164.31.

On the flip side, if the pair drops below 162.00, that would pave the way to test the Tenkan-Sen at 161.48 before slumping toward the Senkou Span A at 160.91.

EUR/JPY Price Action – Daily Chart

• EUR/JPY loses ground due to expected intervention in the Forex market.
• Japan's Shindo expects for close collaboration between the BoJ and the government to implement suitable monetary policies.
• Japan’s GDP Q4 eases to a 0.1% decline; indicating a technical recession.
• ECB's forward-looking wage tracker signals solid wage pressures.

EUR/JPY retreats from recent highs after Japan's top officials hinted at a potential intervention in the Forex market to curb further weakness in the Japanese Yen (JPY). Additionally, the escalated geopolitical tensions in the Middle East boost demand for the safe-haven JPY and drags the EUR/JPY cross to 161.10 during the European session on Thursday.

On Thursday, Japan's Economic Minister Yoshitaka Shindo commented that specific monetary policy measures are within the purview of the Bank of Japan (BoJ) to determine. He acknowledged that the BoJ considers a variety of data, including consumption patterns, economic projections, and associated risks when formulating monetary policy.

Economic Minister Shindo expressed expectations for close collaboration between the BoJ and the government to implement suitable monetary policies aimed at sustainably achieving the price stability target, alongside fostering wage growth.

The preliminary Japan’s Gross Domestic Product (GDP) eased to a 0.1% decline QoQ from the previous decline of 0.8%, against the expected increase of 0.3% in the fourth quarter. The weak fourth-quarter Gross Domestic Product (GDP) figures in Japan add complexity to the monetary policy outlook for the Bank of Japan (BoJ).

Rather than experiencing slight growth compared to the third quarter, the economy faced contraction once again. This development indicates that Japan has entered a technical recession in the latter half of 2023, as negative growth persisted in the third quarter, albeit at a more significant magnitude.

However, the Euro (EUR) encountered obstacles subsequent to the publication of the seasonally adjusted Eurozone Gross Domestic Product (GDP) data on Wednesday, which remained unchanged as anticipated for the fourth quarter. Despite this, the ECB's forward-looking wage tracker continues to signal robust wage pressures.

Christine Lagarde, President of the European Central Bank (ECB), remarked that recent data suggests continued subdued economic activity in the near term. While acknowledging the ongoing disinflationary trend, Lagarde stressed the importance of instilling confidence that this trajectory will ultimately lead to the sustainable attainment of the ECB's 2% inflation target.

• EUR/JPY weakens following the verbal intervention by Japanese authorities on Wednesday. 
• Japan's top currency diplomat Masato Kanda said authorities will take steps in the market if needed.
• ECB’s Lane said the number of rate cuts will depend on the data. 
• Traders will closely monitor the Eurozone GDP growth numbers for Q4, due on Wednesday. 

The EUR/JPY cross loses momentum during the early European session on Wednesday. Some verbal intervention from the Japanese authorities boosts the Japanese Yen (JPY) and weighs on the EUR/JPY cross. Investors await the Eurozone Gross Domestic Product (GDP) for the fourth quarter. This event might trigger volatility in the market. At press time, the cross is trading at 161.23, down 0.14% on the day. 

Early Wednesday, Japan's top currency diplomat Masato Kanda warned that recent movements in the FX market have been rapid, and authorities will take steps in the market if needed. Additionally, Finance Minister Shunichi Suzuki said that rapid FX moves are undesirable and that the government will monitor the market with stronger urgency. This, in turn, provides some support for the JPY against its rivals. 

On the Euro front, the European Central Bank (ECB) has kept rates steady at a record high since September 2023. However, slowing growth and easing price pressures are fueling speculation about rate cuts, with investors anticipating the first move in April or June. ECB chief economist Philip Lane said on Tuesday that the number and exact timing of rate cuts will depend on how much progress the central bank makes towards its target. 

ECB Governing Council member Pablo Hernandez de Cos said that the central bank’s new outlook for inflation and economic growth in March will be pivotal in deciding when to start cutting interest rates.  

Investors will keep an eye on the Eurozone GDP growth numbers for Q4 and December Industrial Production. The stronger-than-expected data could lift the Euro (EUR) and cap the downside of the cross. On Thursday, ECB’s President Christine Lagarde is set to speak. Market players will take cues from the events and find trading opportunities around the EUR/JPY cross. 

• EUR/JPY attracts fresh buyers on Monday and moves back closer to last week’s swing high.
• Dovish BoJ's remarks, along with a positive risk tone, undermine the JPY and offer support.
• Expectations for an imminent shift in the BoJ’s policy and ECB rate cut bets cap the upside.

The EUR/JPY cross regains positive traction on the first day of a new week and climbs back above the 161.00 round-figure mark during the Asian session. Spot prices remain well within the striking distance of over a two-week high touched on Friday and seem poised to prolong the recent appreciating move from the vicinity of the 158.00 mark, or the monthly trough.

Last week's dovish remarks by the Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, saying that aggressive tightening is unlikely even after an exit from negative interest rate policy, continue to undermine the Japanese Yen (JPY). Apart from this, a generally positive risk tone further contributes to safe-haven JPY's relative underperformance and turns out to be another factor lending support to the EUR/JPY cross.

Expectations that Chinese authorities will do more to stimulate the economy, along with easing fears about a further escalation of geopolitical tensions in the Middle East, remain supportive of the recent risk-on rally across the global equity markets. In fact, the Israel military said on Monday that it had concluded a series of strikes in southern Gaza days after Prime Minister Benjamin Netanyahu rejected a ceasefire proposal from Hamas.

That said, growing acceptance that the BoJ will eventually abandon its ultra-loose monetary policy settings after the outcome of annual wage negotiations in March should help limit the downside for the JPY. Apart from this, rising bets that the European Central Bank (ECB) will start cutting interest rates at the start of the second quarter might hold back bulls from placing fresh bets around the shared currency and cap the EUR/JPY cross.

The bets were reaffirmed by a fall in German inflation, which eased to the 3.1% YoY rate in January from the 3.8% in the previous month. Adding to this, ECB Governing Council member Fabio Panetta said on Saturday that the moment is fast approaching for the central bank to cut interest rates. Panetta added that timely and gradual steps could help to reduce ensuing volatility in financial markets and the economy.

This, in turn, warrants caution before positioning for any further appreciating move in the absence of any relevant market-moving economic releases on Monday. Moving ahead, investors now look to the first estimate of the fourth-quarter GDP growth figures from the Eurozone and Japan, due for release on Wednesday and Thursday, respectively, which, in turn, should provide a fresh impetus to the EUR/JPY cross.

Technical levels to watch

• EUR/JPY hits year-to-date high, buoyed by positive sentiment and BoJ dovish comments.
• Above 161.00, eyes on 162.00 resistance; below 160.27 swing low may test 160.00 support.
• Technical analysis hints at pullback, with critical supports at 160.00, today’s low 160.77, and pivot 160.46

The EUR/JPY pierces the 161.00 figure and hits a two-week high of 161.26, courtesy of a risk-on impulse and “dovish” comments by a Bank of Japan (BoJ) member. At the time of writing, the pair hovers around 161.00, clocking minimal 0.05% gains.

The daily chart portrays the EUR/JPY pair is upward biased. Still, Friday’s price action is shaping a doji, which indicates neither buyer's nor sellers' commitment to their positions. With that said, if buyers reclaim 161.00, look for an upside move to 162.00. On the flip side, if sellers step in and clear the February 5 swing low of 160.27, that could pave the way to challenge 160.00.

EUR/JPY Price Action – Daily Chart

In the short term, the divergence between EUR/JPY price action and Relative Strength Index (RSI) studies could open the door for a pullback. The first support is seen at 160.00 the confluence of the Tenkan and Kijun-Sen, followed by today’s low of 160.77, followed by the daily pivot at 160.46.

EUR/JPY Price Action – Hourly Chart

• EUR/JPY trades weaker near 160.90 in Friday’s early European session. 
• The German Harmonized Index of Consumer Prices (HICP) rose 3.1% YoY in January, in line with market expectations.
• The Japanese Yen was further weakened by dovish comments from Bank of Japan (BoJ) policymakers on Thursday.

The EUR/JPY cross snap a two-day winning streak below the 161.00 psychological mark during the early European session on Friday. The cross attracts some intraday sellers following the German inflation data. Investors await German Buba President Nagel's speech later on Friday for fresh catalysts. At press time, EUR/JPY is trading at 160.90, down 0.02% on the day.

The latest data from the German statistics office Destatis on Friday showed that the German Harmonized Index of Consumer Prices (HICP) rose 3.1% YoY in January. This figure was in line with market expectations. On a monthly basis, the nation’s HICP dropped 0.2% MoM in January from a 0.2% decline in December. Additionally, the headline Consumer Price Index (CPI) came in at 0.2% MoM and 2.9% YoY in January.

European Central Bank (ECB) Governing Council member Martins Kazaks said investor hopes for monetary easing at one of the next two meetings might be too aggressive. Kazaks further stated that he will wait until the inflation story is over, and then he will consider rate cuts step by step. Meanwhile, ECB Chief Economist Philip Lane and ECB policymaker Pierre Wunsch said that they prefer to wait for more data before cutting rates.

On the other hand, the dovish remarks from the Japanese policymakers weigh on the Japanese Yen (JPY) and act as a tailwind for the EUR/JPY cross. The Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said that the central bank will not hike aggressively upon ending negative rates, even after ending its negative interest rate policy. Furthermore, BoJ Governor Kazuo Ueda said on Friday that the possibilities are high for accommodative conditions to stay even if negative rates are abandoned.

Later on Friday, traders will monitor the Italian Industrial Output and German Buba President Nagel's speech. Next week, the Eurozone and Japan’s Gross Domestic Product (GDP) for the fourth quarter (Q4) will be released. Traders will find trading opportunities around the EUR/JPY cross.