Yen boosted by BoJ’s hints of pivot

The EUR/JPY pair is trading around 156.60, or its lowest point since early August. Governor Ueda said that a shift in course might happen before the year is over. The ECB’s decision to hike rates on Thursday is still up for debate in the markets.

On Monday, the EUR/JPY varied between 156.60 and 157.55. On the one hand, the Japanese Yen has gained ground against the bulk of its rival currencies, including the USD, GBP, AUD, and other major currencies, as a result of rising Japanese Government Bond yields after Bank of Japan (BoJ) comments on monetary policy. The euro is trading more subduedly as investors get ready for the European Central Bank (ECB) decision on Thursday.

Governor Ueda’s remarks during the Asian session are a major factor in the Japanese Yen’s strong performance during the session. He noted that by year’s end, the Bank of Japan (BoJ) might have gathered sufficient data to determine whether the economy is prepared to switch to a contractive monetary policy.

Despite this, he continues to think that inflation and wages are not progressing as predicted by the bank. However, if they continue to expand steadily for the remainder of this year, the bank may decide to abandon its policy of negative interest rates.

The 10-year JGB rate crossed above the 0.70% mark, while the 2- and 5-year JGB yields increased to their highest levels since January.

Markets are anticipating the ECB’s decisions on Thursday on the EUR. The World Interest Rates Probabilities (WIRP) tool indicates that markets discount a 25-basis point hike’s chances by over 40%, but analysts also think that the outcome will be close. Investors will also pay particular attention to Lagarde’s tone and the ECB’s announcement in search of hints about forward guidance.

The daily chart’s technical analysis indicates a neutral to bearish outlook for EUR/JPY, suggesting the possibility of more bearish movement.