EUR/JPY extended its rally on Tuesday, surging past 159.00 as the Japanese yen remained under pressure amid a widening policy divergence between the Bank of Japan (BoJ) and other major central banks. The yen’s persistent weakness has fueled gains in the currency pair, pushing it to its highest level in a week.
The BoJ’s commitment to ultra-loose monetary policy continues to weigh on the yen, particularly as global markets anticipate a prolonged period of higher interest rates in the Eurozone and the United States. While speculation over a potential BoJ policy shift has surfaced, the lack of concrete action has kept the yen on the defensive, benefiting EUR/JPY bulls.
Meanwhile, the euro has found support from hawkish signals within the European Central Bank (ECB), with officials hinting at the possibility of keeping rates elevated for longer. The ECB’s stance contrasts sharply with the BoJ’s reluctance to tighten monetary policy, reinforcing the upward momentum in EUR/JPY.
Broader risk sentiment has also played a role, as equity markets remain steady despite lingering concerns over global growth. Investors appear to be favoring carry trades, borrowing in lower-yielding currencies like the yen to invest in higher-yielding assets, which has exacerbated the yen’s depreciation.
Technical indicators suggest that EUR/JPY remains bullish, with the next resistance level near 159.50. A break above this level could open the door for further gains, while downside support is likely around 158.00 in case of any pullback. Traders remain cautious, keeping a close watch on upcoming BoJ and ECB statements for further cues.
Looking ahead, analysts expect continued volatility in the pair, with the yen’s trajectory largely dependent on any potential shift in BoJ policy. Unless Japan’s central bank signals a stronger stance on tightening, EUR/JPY could maintain its upward momentum in the near term.
