The euro-yen cross continues its upward momentum for a fourth straight session, rising to nearly a three-week high around 172.75–172.80 during Asian trading on Tuesday. The move is largely driven by sustained weakness in the Japanese Yen, while the euro remains capped by a modest U.S. Dollar rebound.
Yen under pressure amid BoJ uncertainty and risk-on sentiment
The Japanese Yen remains offered as investors question the timing of the Bank of Japan’s (BoJ) next rate hike. At the same time, a positive tone in Asian equity markets has dampened safe-haven demand for the currency, leaving the JPY on the defensive. This dynamic has allowed EUR/JPY to recover sharply from last week’s low near the 171.00 mark.
Euro steadies as inflation expectations support policy outlook
While the euro has seen mild pressure from a stronger U.S. Dollar, downside remains limited. The higher-than-expected German inflation data for August has reduced expectations of imminent European Central Bank (ECB) rate cuts, providing a supportive backdrop for the single currency. Market participants now await preliminary Eurozone Harmonized Index of Consumer Prices (HICP) figures later today, which could shape ECB expectations and inject fresh volatility into the pair.
Policy divergence keeps bulls cautious
Despite the current upside, EUR/JPY’s advance may face resistance given the growing belief that the BoJ remains committed to gradual policy normalization, while the ECB is perceived as leaning dovish in the medium term. This divergence in outlook could limit the pair’s upside potential and warrants caution for traders positioning ahead of Eurozone inflation data.
Outlook
EUR/JPY trades firmly in positive territory, but the near-term trajectory will likely hinge on incoming inflation figures from the Eurozone. A stronger reading could extend gains toward 173.50, while softer data may trigger a corrective pullback, especially if expectations for ECB easing regain traction.
