EUR/JPY traded with modest gains during the Asian session on Wednesday, climbing to around 183.20 and snapping a three-day losing streak. Despite the small rebound, the pair remains near a two-week low recorded on Monday, with intraday gains limited to less than 0.10%.
JPY under pressure amid fiscal concerns and risk-on sentiment
The Japanese Yen (JPY) continues to face downward pressure amid Japan’s fiscal concerns, a broadly risk-on market mood, and lingering uncertainty about the timing of the next Bank of Japan (BoJ) interest rate hike. These factors have supported EUR/JPY, as traders take advantage of the softer yen.
Meanwhile, the Euro benefits from a relatively weaker US Dollar and hawkish signals from the European Central Bank (ECB), which has indicated little appetite to cut interest rates further. Markets currently expect the ECB to maintain a steady 2% deposit rate through all eight scheduled meetings this year, supported by robust Eurozone economic growth throughout 2025.
Focus on eurozone inflation data
Inflation in Germany, the Eurozone’s largest economy, slowed more than anticipated in December, dropping from 2.6% to 2%, adding nuance to the ECB’s policy outlook. Investors now turn their attention to the preliminary Eurozone consumer inflation report, scheduled for release later today, which could provide fresh impetus for the shared currency.
Technical outlook: cautious optimism for EUR/JPY
While the fundamentals favor further gains for EUR/JPY, caution remains warranted. Potential interventions by Japanese authorities to curb excessive JPY weakness and expectations that the BoJ will continue its policy normalization path suggest that bullish traders should wait for clear follow-through before confirming a sustained reversal. The corrective slide from the all-time peak over the past two weeks may not yet be fully resolved, leaving the pair in a sensitive position just above the 183.00 mark.
Ready to start trading Forex? Join iXBroker today and kick-start your trading journey now!
