Forex Forecast: EUR/JPY Nears 166.00 as JPY Slumps

Key Points:

• EUR/JPY experienced a strong uptrend, nearing a target of 166.00 due to Japan’s dovish monetary policy.
• Potential interventions by Japanese authorities around the 155.00, 160.00, and 170.00 levels to stabilise the Yen.
• BoJ is expected to hold rates until at least June, with uncertain future hikes influencing JPY pairs.

The currency pairs EUR/JPY and USD/JPY have recently drawn significant attention due to their potential volatility and implications for traders. The EUR/JPY pair is experiencing a robust upside trend, with market projections targeting a rise to 166.00. The Japanese Yen‘s persistent weakness, largely due to the Bank of Japan’s dovish monetary policy, shapes this expectation. Currently, the pair is hovering near multi-year highs, and the anticipation is that it will continue to climb further, driven by the unyielding soft stance of the BoJ on monetary tightening.

Potential Currency Controls if USD/JPY Hits 155.00 to 170.00

Conversely, the USD/JPY pair is under speculative scrutiny, as there is potential for intervention by Japanese authorities should the Yen depreciate significantly further. Notably, stealth intervention could stabilise the currency if the Yen approaches or breaches certain thresholds—specifically around 155.00 and newly considered intervention points at 160.00 and 170.00. A senior executive from Japan’s ruling party mentioned that Yen’s decline towards current levels could be seen as excessive. This might prompt the government or central bank to intervene to correct the significant depreciation.

Bank of Japan’s Rate Path: Steady Until June

All eyes are on the Bank of Japan’s interest rate decision this Friday and its implications for financial markets. A Reuters poll from April 11-17 shows economists expect no Bank of Japan rate hikes before June. Moreover, although experts expect additional rate hikes, they have not determined the exact timing. This decision could significantly affect EUR/JPY and USD/JPY pairs, potentially reinforcing or altering trends based on decision details.

EUR/JPY’s Future Hinged on ECB’s Upcoming Rate Decision

Expectations are rising for a possible interest rate cut at the European Central Bank (ECB) meeting scheduled for June. ECB officials, including Villeroy de Galhau and Joachim Nagel, have hinted at such an adjustment. Meanwhile, Nagel suggested that a rate cut in June might not necessarily lead to a sequence of further cuts. Any ECB policy changes will significantly impact the euro’s strength, critically influencing the EUR/JPY trading pair.