EUR/JPY remains on the defensive below 159.70, eyes on Eurozone Retail Sales

• EUR/JPY edges lower to 159.60 amid the BoJ’s hawkish tilt and safe-haven flows.
• Investors anticipate the ECB to embark on the first rate cut at the June meeting.
• BoJ policymakers hinted about the monetary policy shift, which lifts the Japanese Yen. 
• The Eurozone Retail Sales will be released later on Tuesday. 

The EUR/JPY cross extends its downside above the mid-159.00s during the early European session on Tuesday. Investors await the December Eurozone Retail Sales for fresh catalysts. Meanwhile, the hawkish tilt from the Bank of Japan (BoJ) and ongoing geopolitical tensions in the Middle East might boost the safe-haven Japanese Yen (JPY) against the Euro (EUR). The cross currently trades near 159.60, losing 0.05% on the day.  

On Monday, Germany’s Trade Balance rose to €22.2 billion in December from the previous reading of €20.7 billion. German Imports fell 6.7% in the same period versus a 1.5% rise prior and the exports dropped 4.6% in December from a 3.5% rise in November. Furthermore, Germany’s HCOB Composite Purchasing Manager’s Index (PMI) came in at 47.0 versus the expectation and the previous reading of 47.1. Investors continue to expect the ECB to embark on the first rate cut at the June meeting. However, incoming data such as inflation and wage growth will confirm an inflation path of 2%.

On the Japanese Yen front, the Bank of Japan (BoJ) is preparing to exit negative interest rates by April and overhaul other components of its ultra-loose monetary framework. However, the central bank is likely to go slow on any subsequent policy tightening amid the continuing risks. The hawkish stance from the BoJ could provide some support to the Japanese Yen (JPY) and act as a headwind for the EUR/JPY cross. 

Traders will focus on Eurozone Retail Sales, which are projected to drop 1.0% MoM and 0.9% YoY in December. Traders will take cues from the figures and find trading opportunities around the EUR/JPY cross.