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EUR/JPY Rebounds as Safe-Haven Demand Wanes, Central Banks Signal Diverging Paths
Economic
Summary:
EUR/JPY rebounds above 162.40 as risk appetite returns amid easing US-China trade tensions and dovish ECB commentary, while the Bank of Japan holds a cautious stance ahead of its policy decision.
Buy
TradingEURJPY
EXP
162.400
Entry Price
164.900
TP
161.000
SL
162.034 +0.065 +0.04%
0
Point
Flat
161.000
SL
CLOSING
162.400
Entry Price
164.900
TP
The EUR/JPY currency cross climbed on Tuesday, recovering from over 0.50% losses in the previous session, as improving global risk sentiment and diverging monetary policy expectations between Europe and Japan fuel renewed interest in the pair. As of the European session, EUR/JPY is trading around 162.40, bolstered by a sharp drop in demand for the Japanese Yen, which has historically served as a safe-haven asset in times of uncertainty.
This shift in sentiment comes on the heels of optimistic developments surrounding US-China trade relations. In a move that lifted market confidence, former US President Donald Trump voiced support for easing tariffs on Chinese imports, a gesture met with reciprocal action from Beijing, which announced exemptions on select US goods previously subjected to punitive duties. Although still tentative, this signals a thawing in the long-standing trade standoff between the world’s two largest economies and has injected a measure of calm into global markets.
The Japanese Yen’s weakness underscores a broader market transition away from safe-haven assets. Investors are rotating capital into risk-sensitive currencies and equities, reflective of growing hopes that trade tensions may de-escalate in the near term. The Yen, typically favored during times of geopolitical and economic stress, is seeing diminished demand as traders pivot toward higher-yielding alternatives.
Meanwhile, attention is turning to the Bank of Japan’s upcoming monetary policy meeting scheduled for Thursday. While most analysts expect the BoJ to hold interest rates steady amid lingering concerns over Japan’s fragile economic outlook, the recent uptick in inflation has introduced an element of uncertainty. Should inflationary pressures persist, the BoJ may find itself reconsidering its ultra-loose stance a move that could eventually support the Yen, though such a pivot appears unlikely in the immediate term.
Moreover, speculation is growing that a swift trade pact between the US and Japan should one materialize could embolden Japanese policymakers to entertain the idea of policy normalization. Such a move would represent a notable departure from the BoJ’s traditionally cautious tone and set it on a different trajectory than the Federal Reserve, which is increasingly expected to tilt dovish as global growth moderates.
On the other side of the currency cross, the Euro is grappling with its own set of challenges. The European Central Bank appears to be firmly committed to an accommodative stance, as reinforced by recent remarks from ECB Governing Council member Olli Rehn. Speaking on Monday, Rehn suggested that the central bank may need to push interest rates below the so-called neutral level to sustain the Eurozone’s faltering recovery.
His comments come amid a backdrop of persistent economic malaise in Europe. Earlier this month, the ECB slashed rates for the seventh time this year, a clear signal that policymakers remain concerned about the region’s vulnerability to external shocks, including ongoing geopolitical tensions and weakening global demand.
Market expectations for further rate cuts have intensified sharply in response. According to LSEG data, traders are now pricing in a 75% probability of another ECB rate cut by June up significantly from just 60% a few weeks earlier. This dovish tilt has added downward pressure on the Euro, potentially capping the upside for EUR/JPY despite broader risk-on flows.
Technical Analysis
From a technical standpoint, the EUR/JPY pair found a temporary floor near 161.90, just above the 55-day moving average. This level has emerged as a crucial support zone following Monday’s sell-off, which briefly pulled the pair below the 163.25 resistance line a level that has consistently served as a barrier to upside momentum in recent weeks.
The ability of the pair to stabilize above 161.90 suggests that bullish momentum may be reasserting itself. Analysts now anticipate a renewed push toward breaching the 163.25 resistance level. Should this breakout materialize, the path could open toward the next upside targets at 164.20 and potentially 164.90, provided market sentiment remains constructive.
The expected trading range for the session is seen between 161.85 and 163.25, with a general bias favoring the bulls. A confirmed break above 163.25 would reinforce the positive technical structure and signal the resumption of the broader uptrend.
TRADE RECOMMENDATION
BUY EURJPY
ENTRY PRICE: 162.40
STOP LOSS: 161.00
TAKE PROFIT: 164.90
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