EUR/JPY bounces off one-month low, struggles to capitalize on move beyond 160.00

• EUR/JPY attracts some buyers on Friday, though the upside potential seems limited.
• Bets that the BoJ will hike rates next week should underpin the JPY and cap the cross.
• The ECB’s dovish bias continues to weigh on the Euro and warrants caution for bulls.

The EUR/JPY cross recovers a few pips from a nearly one-month low touched during the Asian session on Friday and currently trades around the 160.00 psychological mark. The uptick, however, lacks bullish conviction amid the divergent Bank of Japan (BoJ)-European Central Bank (ECB) policy outlook, suggesting that any further move up might be seen as a selling opportunity. 

The recent remarks from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino lifted market bets that the central bank will hike interest rates at its upcoming policy meeting next week. Furthermore, the broadening inflationary pressure in Japan supports prospects for further policy tightening by the BoJ, which might continue to underpin the JPY and keep a lid on the EUR/JPY cross. 

The shared currency, on the other hand, continues with its struggle to attract any meaningful buyers growing acceptance that the ECB will lower borrowing costs further amid concerns about the faltering Eurozone economy. Adding to this, a rise in German core annual inflation raises stagflation worries for the Eurozone's largest economy, which might further contribute to capping the EUR/JPY cross. 

Traders now look forward to the release of the final Eurozone CPI print for short-term opportunities. Nevertheless, spot prices remain on track to register losses for the third consecutive week. Moreover, the aforementioned fundamental backdrop seems tilted firmly in favor of bearish traders and supports prospects for an extension of a multi-week-old downtrend.