Title: EUR/JPY Rallies as BoJ Rate Uncertainty and Risk Tone Support, ECB Cut Bets Loom
The EUR/JPY cross saw a strong rally on Tuesday, bouncing back from a one-week low as dip-buying emerged. The uncertainty surrounding a potential rate hike by the Bank of Japan (BoJ) and a positive risk tone in global markets weighed on the Japanese Yen (JPY), providing support for the pair.
Japanese Prime Minister Fumio Kishida’s resignation added to the political uncertainty in Japan, potentially delaying the BoJ’s plans to raise interest rates. This, combined with bullish sentiment in equity markets, acted as a tailwind for EUR/JPY.
However, concerns over escalating geopolitical tensions and improving economic data from Japan could limit further gains. Additionally, expectations of a rate cut by the European Central Bank (ECB) due to weak economic conditions in the Eurozone may hinder the Euro bulls from pushing the pair higher.
Investors are now waiting for the final Eurozone CPI data, which could impact the Euro and create short-term trading opportunities for EUR/JPY. It is advisable to wait for strong buying momentum before considering a position to capitalize on the recent recovery from the YTD low.
Analysis: The EUR/JPY pair experienced a significant rebound driven by factors such as BoJ rate uncertainty, global risk sentiment, and ECB rate cut expectations. Investors should monitor economic data releases and geopolitical developments to make informed decisions regarding their investments in the currency pair.