Snapshot: EUR/JPY is holding firm near 170.50, driven by the widening disparity between ECB and BoJ monetary policies. The ECB’s recent 25bp rate cut to 2.50% contrasts sharply with the BoJ’s slow normalisation bias, reinforcing the carry appeal of the Euro. Today’s catalyst is the relative calm after the ECB monetary policy statement, which continues to price in a mild easing bias.
- Watch 171.00 as a key resistance level, a break of which could trigger further upside.
- Risk stems from potential jawboning by the BoJ should Yen weakness accelerate past prior intervention zones.
Bias into NY: We remain bullish on EUR/JPY, targeting 171.00, as the ECB’s dovish stance and the BoJ’s cautious approach to hiking keep the rate differential firmly in the Euro’s favour. While rising US real yields, currently at 1.96%, present a headwind to risk assets generally, the central bank divergence remains the dominant driver for Euro/Yen.