EURJPY Remains Open For Bullish Expansion

EURJPY remains open for bullish expansion. The recent surge in the EUR/JPY pair has been largely attributed to the positive economic data coming from the Eurozone in Q2. The GDP increased by 0.3% after a period of contraction. This suggests that the Eurozone is experiencing economic improvements. This has raised expectations for more interest rate hikes from the ECB. Furthermore, Eurozone inflation has been resilient, showing some signs of improvement. The headline and core inflation declined by 0.1% in July, but the annualized headline inflation was slightly higher than expectations at 5.3%. Core inflation also stayed steady at 5.5%. This indicates persistent inflationary pressures in the Eurozone. It further supports the case for the ECB to continue with its rate-tightening cycle, potentially resulting in more interest rate hikes.

Yen Weakens Amid BoJ Decision

The Bank of Japan’s (BoJ) decision to provide greater flexibility to the Yield Curve Control (YCC) was meant to reduce the central bank’s bond-buying operations. The YCC allows the BoJ to control the yield curve of Japanese Government Bonds (JGBs). Despite the increased flexibility in the YCC, the yen has weakened in the market. The decreased bond-buying operations were expected to be offset by other factors. However, these factors have not been enough to prevent the yen from weakening. Speculations have been made as to what other factors may have led to the yen’s weakening as we speak.

The rise in the EUR/JPY pair is primarily driven by positive Eurozone data. This also includes GDP expansion and indications of persistent inflationary pressures. The expectations of more interest rate hikes by the ECB further contribute to the strengthening of the Euro against the Japanese Yen. Meanwhile, the Japanese Yen has weakened despite the BoJ’s measures to provide more flexibility to the Yield Curve Control.

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