EUR/JPY finds cushion around 138.50 as focus shifts to eurozone Retail Sales

• EUR/JPY is oscillating above 138.50, upside remains favored on ECB-BJ policy divergence.
• To fix the inflation mess, the ECB is left with no other choice than to end its low rates cycle.
• Upbeat Japan’s employment data failed to strengthen the yen bulls.

The EUR/JPY pair is juggling in a narrow range of 138.45-138.70 in the early Tokyo session. The cross has remained in the grip of the shared currency bulls for the last two weeks on expected divergence in the ECB-BOJ monetary policy stance as early as possible.

The European Central Bank (ECB) is qualified to announce a hawkish interest rate decision in its June monetary policy. Soaring inflation in eurozone amid rising prices of oil, food products, and other commodities are impacting the wallets of the households, and fixing the inflation mess is highly required.

One thing is worth noting that the eurozone has failed to keep the improvement in the employment data. The Unemployment Rate remained constant at 6.8%, lower than the market consensus of 6.7%. Despite a flat performance on the employment front, ending of the lower rate culture is highly needed to maintain harmony in the economy.

Going forward, investors will keep an eye on the eurozone Retail Sales, which are due on Friday. A preliminary estimate for the annual and monthly Retail Sales is 5.4% and 0.3% respectively.  The economic data is expected to display an outperformance as the prior prints were 0.8% on annual basis and -0.3% on monthly basis.

On the Japanese yen front, the upbeat employment data failed to strengthen the yen bulls. The Jobs/Applicants ratio was improved to 1.23% vs. the former figure of 1.22%. Also, the Unemployment Rate jumped to 2.5% against the estimates and the prior print of 2.6%. The Bank of Japan (BOJ) will continue with its ultra-loose monetary policy as the growth forecasts are still lower than the pre-pandemic records.