EUR/JPY Slips to 168.00 as BoJ Rate Hike Prospects Support Yen

Resistance: 169.00 / 169.72 (11-month high)
Support: 167.80 / 167.00
Trend: Consolidating with downside bias

EUR/JPY Slips Below 168.10 Amid Growing BoJ Rate Hike Bets

The EUR/JPY pair trades near 168.10 during the European session on Tuesday, continuing its retreat from an 11-month peak of 169.72 touched on Monday. This marks a break in the pair’s three-day winning streak, as the Japanese Yen gains renewed strength on the back of shifting expectations for monetary tightening by the Bank of Japan (BoJ).

JPY Strengthens as BoJ Hawks Eye Rate Hikes

The latest data from Japan revealed that core inflation rose to a 2.5-year high in May, staying above the BoJ's 2% target. This builds a case for the central bank to accelerate interest rate hikes, especially as companies begin to pass wage hikes onto consumers.

Combined with a strong Japanese PMI print, the economic outlook has further reinforced investor belief that the BoJ could tighten policy sooner than previously expected — driving demand for the Japanese Yen and putting downward pressure on the EUR/JPY pair.

Euro Supported by Risk-On Sentiment

Despite the cross-pair's fall, the Euro remains relatively supported by an improved global risk appetite following the ceasefire between Israel and Iran, which has helped stabilize markets and temper safe-haven flows into the Yen.

However, with BoJ policy expectations now in the spotlight and Japan’s inflation proving sticky, the JPY is likely to remain firm, potentially capping any EUR/JPY upside in the near term.