CFD Trading Rate Euro vs Japanese Yen (EURJPY)

• EUR/JPY appreciates as traders expect the Bank of Japan to keep interest rates steady on Thursday.
• Japan’s trade deficit narrowed to ¥117.6 billion in November, down from the previous ¥462.1 billion.
• ECB Lagarde noted that the previous bias toward maintaining "sufficiently restrictive" rates is no longer warranted.

EUR/JPY gains ground after registering losses in the previous session, trading around 161.40 during the Asian hours on Wednesday. The Japanese Yen (JPY) experiences losses as traders now seem convinced that the Bank of Japan (BoJ) will keep interest rates steady on Thursday.

Additionally, Japan's trade data pointed to weak domestic demand amid an uncertain economic outlook and concerns about US President-elect Donald Trump's tariff plans are contributors to refraining the Bank of Japan from hiking interest rates.

On Wednesday, Japan's Ministry of Finance announced an unexpected improvement in the trade deficit for November, which narrowed to ¥117.6 billion from October's ¥462.1 billion. This improvement was primarily attributed to robust export growth, which rose by 3.8% year-on-year in November, while imports fell by 3.8%.

The upside of the EUR/JPY cross could be restrained as the Euro faces challenges as the European Central Bank (ECB) President Christine Lagarde spoke at the Annual Economics Conference, indicating that the central bank is prepared to cut rates further if incoming data confirm that disinflation remains on track. Lagarde also signaled a shift in policy stance, noting that the previous bias toward maintaining "sufficiently restrictive" rates is no longer warranted.

Data released on Monday showed that Eurozone PMI figures surpassed expectations in December. However, Services PMI surveys remain in contraction territory, reflecting mounting concerns about a deepening economic slowdown in Europe, which continues to dampen investor and business sentiment. Traders are now shifting their attention to the Eurozone Harmonized Index of Consumer Prices (HICP) data, set to be released on Wednesday.

• EUR/JPY retreats after hitting a four-week-high of 162.47 on Tuesday.
• The German IFO Business Climate came in at 84.7 in December, down from November’s 85.6 reading.
• The JPY may struggle due to increased chances of the BoJ holding off on a rate hike on Thursday.

EUR/JPY halts its two days of gains, pulling back from a four-week high of 162.47, which was marked on Tuesday. The downside of the EUR/JPY cross is bolstered by the release of mixed German data from the CESifo Group, trading around 161.30 during the European hours.

The headline German IFO Business Climate Index declined to 84.7 in December, from the previous reading of 85.6. Meanwhile, the Current Economic Assessment Index improved to 85.1 from 84.3 in November, surpassing the estimated 84.0. However, the Expectations Index, reflecting firms' outlook for the next six months, dropped sharply to 84.4 in December compared to 87.0 in November.

The Euro faces challenges following the dovish remarks from ECB President Christine Lagarde on Monday. Lagarde spoke at the Annual Economics Conference, indicating that the ECB is prepared to cut rates further if incoming data confirm that disinflation remains on track. Lagarde also signaled a shift in policy stance, noting that the previous bias toward maintaining "sufficiently restrictive" rates is no longer warranted.

Moreover, data showed on Monday that Eurozone PMI figures exceeded expectations in December; however, Services PMI surveys remain in contraction territory amid growing concerns about a deepening economic slowdown in Europe, which continues to weigh on investor and business sentiment. Traders are expected to focus on

However, the downside of the EUR/JPY cross would be limited as the Japanese Yen (JPY) may depreciate due to the rising likelihood that the Bank of Japan (BoJ) may avoid an interest rate hike on Thursday.

The markets are currently pricing in less than a 30% chance of a BoJ’s rate hike in December. Several Bank of Japan (BoJ) policymakers seem in no hurry to tighten monetary policy further, given the minimal risk of inflation overshooting despite Japan's persistently near-zero borrowing costs.

Reports suggested the central bank sees "little cost" in delaying further tightening, preferring to wait for more evidence of wage growth before implementing additional policy adjustments. Japan's economy minister, Ryosei Akazawa, reaffirmed that the Bank of Japan and the government will collaborate on appropriate monetary policies.

• EUR/JPY drifts higher to 161.65 in Monday’s Asian session, up 0.22% on the day. 
• The BoJ is expected to keep rates on hold on Thursday. 
• Hope for political stability after Macron appointed a new Prime Minister lifts the EUR, but ECB’s dovish shift might cap its upside. 

The EUR/JPY cross gains traction to near 161.65 during the early European session on Monday. The Japanese Yen (JPY) weakens amid the growing speculation that the Bank of Japan (BoJ) will keep interest rates steady in the December meeting on Thursday. Later on Monday, the preliminary Eurozone December Purchasing Managers’ Index (PMI) data will be released. Also, the European Central Bank (ECB) President Christine Lagarde is set to speak later in the day. 

The BoJ is scheduled to hold its last policy meeting of the year on December 18-19. The markets are currently pricing in less than a 30% chance of a rate hike in December. Several BoJ policymakers appear to be in no rush to tighten their monetary policy further with little risk of inflation overshooting despite Japan's still near-zero borrowing costs. This, in turn, exerts some selling pressure on the JPY and creates a tailwind for EUR/JPY. 

On the Euro front, French President Emmanuel Macron named François Bayrou, a centrist ally, as prime minister on Friday. The hope for political stability provides some support to the shared currency. However, the upside for the EUR might be capped as the ECB opens the door for further rate cuts. 

The ECB cut interest rates by a quarter point to 3.0% last week and warned that growth would be weaker than it had previously forecast. Traders in swaps markets anticipate the ECB to carry out a further five quarter-point cuts by next September, which would take the deposit rate to 1.75%.

• ECB's rate cut to 3% aims to anchor inflation closer to the 2% target amid ongoing economic challenges.
• Updated ECB forecasts suggest a gradual decline in inflation, with HICP expected to reach 1.9% by 2026.
• Market attention now turns to ECB President Christine Lagarde's upcoming press conference for further cues.

The Euro weakens against the Japanese Yen during the North American session after the European Central Bank (ECB) cut interest rates. At the time of writing, the EUR/JPY trades volatile within the 159.00-159.80 range.

EUR/JPY experiences volatility, after ECB slashes interest rates and updated its forecasts

The ECB lowered their three key interest rates by 25 bps, leaving the deposit rate at 3%. The monetary policy statement mentioned that the central bank is determined to drive inflation to its 2% goal, adding they’re not pre-committed toa particular rate path.

ECB officials added that the disinflation is “well on track” and despite evolving, inflation remains high.

In its meeting, the ECB updated its forecasts for inflation and economic growth. The Harmonised Index of Consumer Prices (HICP) for 2024 is expected to end at 2.4%, down from 2.5%. For 2025 and 2026, HICP is foreseen to end at 2.1% and 1.9%, respectively.

Core HICP is projected to finish the year at 2.9%, unchanged compared to the previous forecast, and for 2025 and 2026 is foreseen to dip to 2.3% and 1.9%, respectively.

The Gross Domestic Product is foreseen at 0.7% I n2024, at 1.1% in 2025 and 1.4% in 2026.

Following the monetary statement release, traders focus shifts to ECB’s President Christine Lagarde press conference at around 13:45 GMT.

EUR/JPY Price Forecast: Technical outlook

The EUR/JPY extended its losses below 160.00, with traders eyeing a re-test of the December 11 low of 158.64. On further weakness, the cross-pair could dive towards the Tenkan-Sen at 158.45, before sliding to 158.00.

Conversely, if buyers push the exchange rate above 160.00, this could pave the way to test the Kijun-Sen at 161.07.

• EUR/JPY extends the rally to near 160.35 in Thursday’s early European session, adding 0.15% on the day. 
• The cross resumes an uptrend above the key 100-period EMA with the bullish RSI indicator. 
• The immediate resistance level is located at 160.70; the crucial support level emerges at the 160.00 psychological level. 

The EUR/JPY cross trades in positive territory for the fourth consecutive day around 160.35 during the early European session on Thursday. The Japanese Yen (JPY) weakens after Reuters reported on Thursday that the Bank of Japan (BoJ) is considering keeping interest rates steady at its December meeting next week. A source said, “Policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.” Later on Thursday, investors will closely monitor the European Central Bank (ECB) interest rate decision. 

Technically, EUR/JPY resumes its uptrend on the 4-hour chart as the price crosses above the key 100-period Exponential Moving Average (EMA). The upward momentum is supported by the Relative Strength Index (RSI), which stands above the midline near 59.45, supporting the buyers in the near term. 

The first upside barrier for the cross emerges at 160.70, the high of December 11. Sustained trading above this level could pave the way to 161.10, the upper boundary of the ascending trend channel. The next potential resistance level is seen at 162.00, representing the high of November 26 and the round figure. 

On the other hand, a breach of the 160.00 psychological level could drag the cross lower to 159.10, the lower limit of the trend channel. Any follow-through selling below the mentioned level could see a drop to 158.65, the low of December 11.  

EUR/JPY 4-hour chart

• The Japanese Yen slid after BoJ officials put next week's rate hike into question.
•  BoJ policymakers affirmed that they see little cost in waiting for the next rate hike, according to Bloomberg.
• Market expectations of a dovish ECB cut on Thursday might hamper the Euro rally.

The Japanese Yen is depreciating across the board on Wednesday, as comments from BoJ policymakers have cast doubt on a widely expected 25 bps rate hike next week. That has boosted the EUR/JPY to test the resistance area at 1.6030.

A Bloomberg report reported on Wednesday comments from BoJ officials observing that they "little cost in waiting for the next rate hike” as, in their opinion, the risks of a weak yen pushing up inflationary pressures have eased.

The officials affirmed that they would not vote against a rate hike in December if proposed, but they did not avoid the negative reaction in the  Japanese Yen

The EUR/JPY rallied about 170 pips after the news to reach a resistance area at 160.30, which, so far, is holding bulls. The ECB is widely expected to cut rates by 25 bps on Tuesday and might hint towards more easing in the light of the weak German economic outlook and the political uncertainty in Germany and France. This is likely to weigh on the pair.

• EUR/JPY loses traction to near 159.50 in Wednesday’s Asian session. 
• The Japanese PPI came in stronger than expected, boosting the JPY.
• The uncertainty over how soon the BoJ could raise rates might cap the downside for the cross.

The EUR/JPY cross attracts some sellers to around 159.50 during the early European session. The Japanese Yen (JPY) strengthens against the Euro (EUR) after the stronger-than-expected Japanese Producer Price Index (PPI) for November. The European Central Bank (ECB) interest rate decision will be in the spotlight on Thursday. 

The preliminary reading by the Bank of Japan (BoJ) showed on Wednesday that the country’s Producer Price Index (PPI) increased by 0.3% MoM in November, better than the 0.2% expected. On an annual basis, the PPI rose by 3.7% YoY during the same reported period, above the market consensus of 3.4%. 
 
Furthermore, the expectation that the ECB will implement aggressive interest rate cuts to prop up the faltering regional economy could weigh on the shared currency. The ECB is widely expected to cut the deposit facility by another 0.25% to 3.00%. This expectation aligns with the ECB’s strategy to guide inflation toward its 2% target against a backdrop of weaker economic growth in the Eurozone.

Nonetheless, the dovish remarks from the Japanese authorities might undermine the JPY and cap the downside for the cross. BoJ’s board member Toyoaki Nakamura said last week that the central bank must move cautiously in raising rates, fueling uncertainty about the BoJ’s December policy decision.

• EUR/JPY may gain ground due to uncertain expectations surrounding the BoJ rate hike in December.
• BoJ board member Toyoaki Nakamura emphasized the need for caution in raising rates.
• Markets are fully pricing in a 25 basis point cut to the ECB’s Deposit Facility Rate, bringing it to 3% on Thursday.

EUR/JPY maintains its position around 159.50 during Tuesday's Asian session. This upward movement in the EUR/JPY cross is likely due to a weaker Japanese Yen (JPY), driven by uncertain expectations about a potential Bank of Japan (BoJ) rate hike in December.

BoJ Governor Kazuo Ueda recently signaled that the timing for the next rate hike is approaching. Combined with data showing strong underlying inflation in Japan, this has increased speculation of a rate hike at the BoJ's policy meeting on December 18-19.

However, some media reports suggest the BoJ may opt to skip a rate hike this month. Additionally, dovish BoJ board member Toyoaki Nakamura emphasized the need for caution in raising rates, adding further uncertainty and weighing on the Japanese Yen.

In the Eurozone, markets are nearly fully pricing in a 25 basis point (bps) cut to the European Central Bank's (ECB) Deposit Facility Rate, bringing it to 3% on Thursday. Several ECB officials have expressed concerns about the risk of inflation falling short of the bank’s target, driven by a weak economic outlook. The ECB has already reduced the deposit rate by 75 bps this year, and Thursday’s anticipated cut would mark the third consecutive reduction.

Market participants expect the Eurozone economy to underperform due to political uncertainty in Germany and France, the largest economies in the bloc. Additionally, concerns are growing about the potential impact on the export sector, particularly with the uncertainty surrounding US President Donald Trump’s administration and its policies once he takes office.

• EUR/JPY is in a downtrend but it has reached oversold levels according to the RSI. 
• The pair is closing in on key support and could find its feet and pullback. 

EUR/JPY extends its decline on Monday but reaches oversold levels. The pair is in a short and medium-term downtrend since the October 31 peak, and given the technical analysis dictum that “the trend is your friend” the odds favor more downside to come. 

However, according to the Relative Strength Index (RSI) the pair is in the oversold zone (below 30) and this means short-holders should not add to their positions. It indicates there is a higher probability of a pullback occurring and prices recovering.

EUR/JPY Daily Chart 

AUD/USD has almost reached support at around 156.50 from the trendline formed by joining the August and September lows. There is a strong possibility the pair could stall at the line and consolidate. 

A deeper sell-off, however, could take EUR/JPY down to 154.00 – 155.00, at the actual  August-September lows. 

• EUR/JPY is falling to a key support level after tumbling further on Friday. 
• It could bounce once it touches the level and the RSI is oversold on an intraday basis, cautioning aggressive short-sellers. 

EUR/JPY extends its downtrend since the Halloween peak and is within spitting distance of hitting key support at the September 30 swing low of 158.11 (red dashed line on chart). 

It is now probably in a short-term downtrend and given it is a principle of technical analysis that trends have a tendency to extend themselves, the odds favor EUR/JPY falling to lower lows.

EUR/JPY Daily Chart 

At the September 30 low the pair will probably find its feet and bounce. The Relative Strength Index (RSI) momentum indicator is in the oversold zone (below 30) on an intraday basis. If the pair closes with RSI still in oversold it will be a signal for short-holders not to add to their short positions. The risks of a pullback will also be greater. 

A deeper sell-off could take EUR/JPY down to the trendline at around 157.00 or even all the way to 154.00 – 155.00, the August-September lows. 

• EUR/JPY loses ground as the Japanese Yen strengthens following Tokyo CPI Data for November.
• Tokyo's core inflation rose by 2.2% YoY, against the expected 2.1% increase, and marked the highest inflation reading in three months.
• Eurozone Core HICP inflation is anticipated to rise 2.8% YoY in November, compared to 2.7% increase in October.

The EUR/JPY pair loses momentum, trading around 158.80 during Friday's Asian session, as the Japanese Yen (JPY) gains strength. This follows the release of Japan's Tokyo Consumer Price Index (CPI) data for November, which exceeded expectations.

Headline Tokyo CPI rose by 2.6% year-over-year in November, a significant increase from 1.8% in October. Similarly, the Tokyo CPI excluding Fresh Food and Energy climbed 2.2% YoY, compared to 1.8% previously, and surpassed the market consensus of 2.1%.

In November, Tokyo's core CPI increased by 2.2% year-on-year, up from 1.8% in October. This rise surpassed market expectations of a 2.1% increase and marked the highest inflation reading in three months. Tokyo's inflation data is closely watched as a leading indicator for national price trends, with nationwide CPI figures usually released about three weeks later.

The core CPI has remained above the Bank of Japan’s (BoJ) 2% target, fueling expectations for a potential near-term rate hike. BoJ Governor Kazuo Ueda reaffirmed that the central bank would continue raising rates if inflation stays on course to sustainably achieve the 2% target.

European Central Bank (ECB) policymakers have voiced concerns over the Eurozone's slowing economic growth, heightening expectations of a rate cut in December. However, uncertainty persists regarding the size of the potential reduction, as the market remains divided.

Traders are now closely watching Friday’s release of the Eurozone Harmonized Index of Consumer Prices (HICP) data. Core HICP inflation is projected to rise by 2.8% YoY in November, compared to 2.7% in October. This uptick could complicate matters for ECB officials, many of whom have recently sought to reassure investors of more rate cuts despite rising inflationary pressures.

• EUR/JPY edges higher on a stronger Euro but fails to build on gains due to conflicting data from the Eurozone. 
• The Yen benefits from heightened expectations of the BoJ hiking interest rates in December, increasing inflows into the Yen.
• Lawmakers in Japan are debating a supplementary budget which could deliver cash handouts to households and stoke inflation. 

EUR/JPY edges higher to just below the 160.00 level on Thursday after survey data released by the European Commission suggested stubborn inflation expectations might keep interest rates more elevated than previously thought in the Eurozone. This supports the Euro (EUR) since higher interest rates support foreign capital inflows. However, weaker German inflation data contradicts the survey’s findings and keeps the Single Currency under pressure.

“The European Commission survey was little changed in November and is still consistent with weak growth at best, while the price components suggest that inflationary pressures remain sticky,” said Elias Hilmer, assistant economist at Capital Economics of the data.

The Japanese Yen (JPY), meanwhile, trades mixed. On the one hand it is pressured by political risk due to the ruling party’s tenuous grip on power, whilst on the other hand it remains underpinned by expectations the BoJ will raise interest rates at the end of the year. 

Political risk for the Yen

On Thursday, the Japanese parliament convened an extraordinary session to begin a 24-day deliberation of the supplementary budget as well as laws governing party funding. 

The supplementary budget is expected to help inflation-hit households with cash handouts, whilst policymakers will also debate new laws around political party fundraising after a high profile scandal, in which members of Prime Minister Shigeru Ishiba’s ruling LDP party were found to have amassed private slush funds from fundraising activities, according to Kyodo News. His party rules Japan with a tenuous minority alongside its junior partner, the Momeito party. 

If the budget is passed it could drive more inflation, increasing the chances of the Bank of Japan (BoJ) raising its permanently ultar-low interest rate of 0.25%. Higher interest rates are positive for the Yen because they increase foreign capital inflows. 

BoJ Governor Kazuo Ueda recently repeated that a rate hike in December was still possible, citing concerns over the Yen’s weakness. Markets are now pricing in a roughly 60% chance of a 25 basis point rate hike in Japan next month, up from around 50% just a week ago, according to Trading Economics. 

German Inflation undershoots expectations 

EUR/JPY sees upside curtailed on Thursday after just-released preliminary German Consumer Price Index (CPI) data for November fell below economists expectations, weighing on the Euro. The data contradicts the earlier European Commission survey data and increases the chances the European Central Bank (ECB) will begin a more aggressive phase of interest rate cuts in the Eurozone.   

German headline CPI rose by 2.2% in November, below the 2.3% expected and core CPI remained at 2.4%, falling below the expected 2.6%. 

Traders now await Japanese Tokyo CPI data on Friday for fresh clues as to the direction of monetary policy in Japan, with implications for the direction of the Japanese Yen and its pairs. 

• EUR/JPY recovers from a multi-month low amid the emergence of some selling around the JPY.
• Bets for a December BoJ rate hike, trade war fears and geopolitical risks could limit JPY losses.
• The setup supports prospects for the emergence of fresh selling around the cross at higher levels.

The EUR/JPY cross gains some positive traction during the Asian session on Thursday and moves away from its lowest level since early October, around the 159.10 region touched the previous day. The intraday uptick lifts spot prices to the 160.00 psychological mark in the last hour and is sponsored by the emergence of fresh selling around the Japanese Yen (JPY).

Any meaningful JPY depreciation, however, seems elusive in the wake of speculations that the Bank of Japan (BoJ) will hike interest rates again in December. Apart from this, US President-elect Donald Trump's tariff threats and geopolitical risks might continue to benefit the safe-haven JPY. This, along with bets for faster interest rate cuts from the European Central Bank (ECB), should act as a headwind for the shared currency and cap the EUR/JPY cross.

From a technical perspective, the recent repeated failures near the 100-period Simple Moving Average (SMA) on the 4-hour chart and a subsequent breakdown below the 162.35-162.30 support favor bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This suggests that any subsequent move up in the EUR/JPY cross could be seen as a selling opportunity and remain limited.

In the meantime, the overnight swing high, around the 160.70 area, is likely to act as an immediate hurdle ahead of the 161.00 mark. Some follow-through buying beyond the 161.30 region might trigger a short-covering rally and allow the EUR/JPY ross to reclaim the 162.00 round figure. The momentum, however, runs the risk of fizzling out rather quickly near the 162.30-162.35 region, which now seems to act as a key pivotal point for short-term traders. 

On the flip side, the Asian session low, around the 159.45 area, could protect the immediate downside ahead of the 159.10-159.05 region, or the multi-month low set on Wednesday. A sustained break below the 159.00 mark will be seen as a fresh trigger for bearish traders and drag the EUR/JPY cross to the 158.55 zone en route to the late September swing low, around the 158.00 mark and the next relevant support near the 157.65 region.

EUR/JPY 4-hour chart

• The EUR/JPY cross may depreciate further as the daily chart analysis suggests a prevailing bearish bias.
• A corrective move could be indicated once the 14-day RSI falls below the 30 mark.
• The primary support appears at the descending channel around the psychological level of 159.00.

EUR/JPY extends its losses for the second consecutive day, trading around 159.60 during the Asian hours on Wednesday. Technical analysis of the daily chart shows the pair is moving downwards within the descending channel pattern, suggesting an ongoing bearish bias.

Additionally, the 14-day Relative Strength Index (RSI) is positioned slightly below the 30 level, confirming the bearish sentiment for the EUR/JPY cross. A dip below the 30 mark would indicate an oversold situation and direct a corrective rebound.

In terms of support, the EUR/JPY cross may find primary support at the lower boundary of the descending channel around the psychological level of 159.00, followed by a two-month low of 158.10, recorded on September 30. A break below this level could strengthen the bearish sentiment and put downward pressure on the currency cross to navigate the area around its 11-month low of 154.41, which was recorded in December 2023.

On the upside, the EUR/JPY cross may approach to test the upper boundary of the descending channel near the nine-day Exponential Moving Average (EMA) at the 161.80 level, followed by the 14-day EMA at 162.43. A decisive breach above these levels would cause the emergence of the momentum shift from bearish to bullish and support the pair to re-test a four-month high of 166.69, a level last seen on October 31.

EUR/JPY: Daily Chart

• EUR/JPY is pulling back within a downtrend that has unfolded since the start of November. 
• Lower lows are expected assuming a break below the November 22 low.  

EUR/JPY establishes a descending sequence of peaks and troughs from the October 31 peak. It is now probably in a short-term downtrend and given it is a principle of technical analysis that trends have a tendency to extend themselves, the odds favor the pair continuing to lower lows.

EUR/JPY 4-hour Chart 

The next target to the downside for EUR/JPY is the 158.11 September 30 swing low (red-dashed line). A break below 159.90 (November 22 low) would provide confirmation. The pair has pulled back to the 161.60s and this also provides them with an entry point that might carry less risk and more reward (unless the correction turns into a reversal).

A deeper sell-off could even take EUR/JPY down to 154.00 – 155.00, the August-September lows. 

• EUR/JPY faces challenges due to risk-off mood following US President-elect Donald Trump's announcement of import tariffs.
• The Japanese Yen may struggle due to uncertainty surrounding the BoJ’s future rate hikes.
• The ECB is widely anticipated to implement a 25 basis point rate cut in December.

EUR/JPY remains in negative territory despite trimming intraday losses, trading near 161.20 during European hours on Tuesday. The EUR/JPY cross faces headwinds as the safe-haven Japanese Yen (JPY) holds firm, bolstered by heightened global risk aversion following US President-elect Donald Trump's renewed tariff threats on China, Mexico, and Canada.

These developments have dampened market sentiment, adding downward pressure on European economies and weighing on the risk-sensitive Euro. As a result, the EUR/JPY cross struggles to gain traction amid a challenging external environment.

However, the Japanese Yen (JPY) may struggle due to uncertainty surrounding the Bank of Japan's (BoJ) future rate hikes. BoJ Governor Kazuo Ueda has hinted at the possibility of another interest rate hike as early as December. Traders are focused on upcoming Tokyo Consumer Price Index data for November, which is seen as a leading indicator of nationwide price trends.

In the Eurozone, markets have fully priced in a 25-basis-point (bps) rate cut by the European Central Bank (ECB) in December, with the probability of a larger 50 bps cut rising to 58%. This underscores growing market pessimism about the region's economic outlook.

Such expectations weigh heavily on the Euro, further limiting the upside potential of the EUR/JPY cross, as concerns about monetary easing and economic weakness continue to dominate market sentiment.

The downside risks persist for the EUR/JPY cross as the Euro also faces pressure from growing concerns about the Eurozone's economic outlook. These concerns are fueled by uncertainties surrounding political instability in Germany and France.

• EUR/JPY struggles to attract any meaningful buying amid mixed fundamental cues.
• The BoJ uncertainty and the risk-on mood undermine the JPY and lend support.
• Bets for a more aggressive ECB rate cuts cap any meaningful upside for the cross. 

The EUR/JPY cross kicks off the new week on a positive note, albeit struggles to capitalize on its intraday move up and remains below the 162.00 mark through the Asian session. Moreover, the fundamental backdrop suggests that the path of least resistance for spot prices is to the downside. 

Investors now seem convinced that increased domestic political uncertainty in Japan could restrict the Bank of Japan (BoJ) from hiking interest rates further. This, along with the prevalent risk-on environment, is seen undermining demand for the safe-haven Japanese Yen (JPY) and lending some support to the EUR/JPY cross. That said, intervention fears and retreating US Treasury bond yields help limit losses for the lower-yielding JPY.

The shared currency, on the other hand, seems vulnerable on the back of a surprise fall in the Eurozone Composite PMI to a 10-month low in November. This comes on top of potential economic risks in the wake of US President-elect Donald Trump's taunted tariffs and lifts bets for faster interest rate cuts from the European Central Bank (ECB). This, in turn, favors the Euro bears and validates the negative outlook for the EUR/JPY cross. 

Even from a technical perspective, the recent repeated failures near the 200-period Simple Moving Average (SMA) on the 4-hour chart favor bearish traders. Adding to this, negative oscillators on daily/hourly charts suggest that any intraday move-up could be seen as a selling opportunity and runs the risk of fizzling out quickly. Investors, however, might wait for acceptance below the 161.00 mark before positioning for any intraday decline.

• EUR/JPY is declining in a short-term downtrend which started in November. 
• The pair is likely to continue lower given technical analysis theory. 

EUR/JPY staircases down from its Halloween peak as it unfolds in a short-term downtrend during November. The odds favor an extension lower given the technical analysis theory that “the trend is your friend”. 

EUR/JPY Daily Chart 

The next downside target is at the 158.11 September 30 swing low. A break below the 159.90

low of the day would provide confirmation. Alternatively traders might look at a lower timeframe chart such as the 1-hour for a pullback – perhaps a three-wave ABC – to provide a lower risk entry-point. 

The Relative Strength Index (RSI) momentum indicator is flirting with the oversold zone below 30. If it closes below 30 the pair will be considered oversold and short holders are advised not to add to their positions. 

A deeper sell-off could even take EUR/JPY down to 154.00 – 155.00 August-September lows. 

• EUR/JPY drops to its lowest level since October in reaction to stronger Japan’s CPI on Friday.
• Reviving December BoJ rate hike bets and geopolitical tensions benefit the safe-haven JPY.
• Expectations for more aggressive rate cuts by the ECB undermine the Euro and the cross. 

The EUR/JPY cross attracts some follow-through selling for the second straight day and drops to its lowest level since October 4 during the Asian session on Friday, albeit it managed to rebound a few pips thereafter. Spot prices currently trade around 161.65-161.70 region, still down for the second straight day amid a stronger Japanese Yen (JPY).

The Bank of Japan Governor Kazuo Ueda said on Thursday that the central bank will seriously take into account the impact of the recent foreign exchange-rate movements could have on the economic and price outlook. Adding to this, data released this Friday showed that all three measures of the Consumer Price Index (CPI) in Japan remain above the BoJ's 2% target. This keeps the door open for another BoJ interest rate-hike move in December, which, along with geopolitical tensions stemming from the worsening Russia-Ukraine war, turns out to be a key factor underpinning the safe-haven JPY. 

The shared currency, on the other hand, continues with its relative underperformance in the wake of bets for more aggressive interest rate cuts by the European Central Bank (ECB) amid a bleak Eurozone economic outlook. In fact, the ECB is anticipated to cut its Deposit Facility Rate again by 25 basis points (bps) in December and lower rates by a cumulative of 100 bps in 2025. Adding to this, concerns that US President-elect Donald Trump's taunted tariffs could have a significant impact on the region's economic growth further undermine the Euro and exert some pressure on the EUR/JPY cross. 

That said, speculations that increased political uncertainty in Japan could delay the BoJ’s plans to raise interest rates further and hold back the JPY bulls from placing aggressive bets. Adding to this, the prevalent risk-on mood caps gains for the safe-haven JPY and helps limit the downside for the EUR/JPY cross. Next on tap is the release of the flash Eurozone PMI prints, which will provide a fresh insight into the region's economic health and influence the common currency. Apart from this, geopolitical development will drive demand for the safe-haven JPY and provide some impetus to the currency pair.