The EUR/JPY pair climbed past 161.00 on Thursday as investors positioned ahead of the European Central Bank’s (ECB) rate decision, with expectations running high for any signals on future monetary policy direction. The euro gained ground against the Japanese yen, benefiting from improved risk sentiment and speculation that the ECB could maintain its cautious stance on interest rates.
Despite persistent concerns over slowing Eurozone growth, the euro has remained relatively stable, supported by expectations that the ECB will avoid an overly aggressive policy pivot. While inflation in the region has moderated, policymakers remain wary of easing too soon, given lingering economic uncertainties. Any hawkish signals from the ECB could provide further upside for the euro in the near term.
On the other side, the Japanese yen continues to face headwinds amid the Bank of Japan’s (BoJ) ultra-loose monetary policy. While there has been speculation about a potential shift in Japan’s stance, no decisive action has yet been taken. This has kept the yen under pressure, allowing EUR/JPY to sustain its gains despite broader market fluctuations.
Traders are also keeping a close watch on broader risk sentiment, with global markets reacting to economic data, geopolitical developments, and central bank decisions. If the ECB signals a more patient approach to rate cuts, the euro could see further strength, extending its rally against the yen. However, any signs of economic weakness in the Eurozone could limit gains and trigger a reversal.
Technically, EUR/JPY is testing key resistance near 161.50, with a break above potentially opening the door for further upside. Support remains around the 160.50 level, where buyers have previously stepped in. Market participants will closely monitor price action following the ECB’s decision to gauge the pair’s next direction.
For now, investors remain cautious, awaiting clearer signals from central banks. If the ECB’s message aligns with expectations of a gradual policy adjustment, the euro may hold its ground, while any unexpected dovish tone could see the yen regain some lost momentum.
