Snapshot: EUR/JPY remains capped by the policy friction between a dovish-leaning ECB, following today’s comments from Frank Elderson, and a Bank of Japan slowly eyeing further hikes. While softening Eurozone wage trackers support the case for further ECB cuts from the current 2.50% deposit rate, extreme Yen weakness keeps Japanese intervention risk on high alert, limiting upside.
- Monitor Eurozone core HICP at 2.3% and sticky services inflation near 3%, which remain the key domestic metrics capping the Euro as doves look to build a case for another rate cut.
- Watch for sudden MoF verbal intervention following Deputy Governor Himino’s parliamentary address, especially as a 12% spike in the VIX to 18.44 threatens to spark a broader unwinding of Yen carry trades.
Bias into NY: We hold a tactically bearish bias on EUR/JPY into the New York open, targeting a drift toward the 168.00 support level as risk-off sentiment and intervention fears trigger Yen short-covering.