The EUR/JPY currency pair extended its gains on Wednesday, marking the fourth consecutive day of positive movement. Following a recovery from last week’s one-month low near the 159.70-159.65 range, the pair saw its prices rise to a one-week high around the 162.35-162.40 area during the Asian session. This rally was supported by a weakening Japanese Yen (JPY) and a shift in global market sentiment.
The global risk outlook has been buoyed by the Israel-Hamas ceasefire and growing optimism that US President Donald Trump may ease sanctions on Russia in exchange for a potential deal to end the Ukraine conflict. Additionally, Trump’s vague trade tariff proposals have stoked investor appetite for riskier assets, further undermining the JPY as a safe-haven currency and benefiting the EUR/JPY pair.
However, the outlook for further JPY depreciation may be limited as expectations mount that the Bank of Japan (BoJ) will raise interest rates on Friday. Furthermore, the strength of the US Dollar (USD) and ongoing concerns about potential tariffs on the European Union, coupled with speculation that the European Central Bank (ECB) may lower borrowing costs, are weighing on the Euro and could prevent significant further gains for the EUR/JPY cross.
Given these mixed factors and the pair’s recent failure to break through the 200-day Simple Moving Average (SMA), caution is advised for bullish traders. Investors are advised to wait for a clearer trend before entering new positions. The focus will shift to ECB President Christine Lagarde’s upcoming speech and the pivotal BoJ policy meeting.
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