EUR/JPY attracts some sellers below 170.50 amid BoJ rate hike hopes

• EUR/JPY trades on a softer note around 170.25 in Monday’s early European session, down 0.67% on the day. 
• The growing speculation of a BoJ rate hike might support the JPY. 
• The ECB's cautious stance might cap the cross’s downside. 

The EUR/JPY cross faces some selling pressure near 170.25 during the early European trading hours on Monday. The higher chance that the Bank of Japan (BOJ) will hike at its July monetary policy meeting provides some support to the Japanese Yen (JPY). Traders will take more cues from the preliminary Eurozone July Purchasing Managers’ Index (PMI) on Wednesday, followed by the Japanese Tokyo Consumer Price Index (CPI) on Friday. 

Japan's core inflation rose for a second straight month in June, fueling market expectations of a near-term interest rate hike by the Japanese central bank. BoJ Governor Kazuo Uedastated that the central bank will push up rates further if rising wages and service prices heighten prospects for durably achieving its 2% inflation target. Nonetheless, more than three-quarters of economists polled by Reuters anticipated the Bank of Japan (BOJ) to keep rates on hold this month due to lacklustre consumption and a fragile economy.

Additionally, the Japan Times reported that hedge funds pared bets against the JPY after a suspected double market intervention from Japanese authorities to bolster the currency. The fear of possible further foreign exchange (FX) intervention from Japanese officials is likely to boost the JPY in the near term. 

On the other hand, the European Central Bank's (ECB) cautious approach to interest rates might cap the downside of the Euro (EUR). The ECB emphasized the data-dependent approach, leaving the timing of rate cuts uncertain. The ECB's cautious stance highlighted geopolitical risks and political uncertainties, which must be watchful and adaptive.