- EUR/JPY is still struggling to gain significant momentum on the second day, Tuesday.
- Uncertainty surrounds the BOJ’s interest rate decisions, along with hopes for a peace agreement between Russia and Ukraine.
- Speculation about immediate ECB rate cuts adds support for the euro and current pricing.
The EUR/JPY cross has continued its sideways movement for a second consecutive day, hovering around the 172.00 mark during Tuesday’s Asian trading session.
Recent agreements between the US and the EU have somewhat alleviated market worries about tariff deflation. This has led to a more stable economic outlook, spurring speculation that the European Central Bank (ECB) will maintain the current course at least until December, which is lending support to shared currencies, including the EUR/JPY cross.
On the other hand, the Japanese yen (JPY) has been underperforming, primarily due to uncertainties regarding the Bank of Japan (BOJ) and its potential interest rate hikes. Separately, there’s a hope that prospects for a resolution to the prolonged Russia-Ukraine conflict could further pressure the JPY, potentially benefiting the EUR/JPY cross.
Additionally, the BOJ recently raised its inflation forecast at the end of July, indicating a possibility of an upcoming interest rate hike by year-end. This likely dampens JPY’s chances for a significant rally against the EUR/JPY cross, so it might be prudent to await stronger follow-through buying before increasing positions.
Traders are looking forward to a speech from President Christine Lagarde on Wednesday, hoping for some insight. However, most attention remains on the Flash PMI data set to be released Thursday. In the meantime, the general sentiment suggests that EUR/JPY is likely to continue its range-bound play due to a lack of significant macro data on Tuesday.
