EUR/JPY slides toward a 177.00 floor amid looming BoJ policy shift

The euro‑yen pair has slipped back toward the 177.00 level, a clear signal that traders are pricing in a potential rate hike from the Bank of Japan (BoJ). At 09:00 JST, the pair hovered around 177.50, down 0.10 % from the previous close, in a market that had been largely quiet after a national holiday.

The move is driven by two key developments. First, BoJ Governor Kazuo Ueda recently cautioned that rising global trade frictions could dampen growth, implying that the central bank may need to tighten policy to support the economy. Second, the European Central Bank (ECB) reiterated that it remains committed to a steady‑policy stance, providing a contrast that has left the euro slightly softer against the yen.

With the 52‑week high at 178.26 on 29 October and the 52‑week low at 154.813 on 27 February, the current level sits just 0.4 % below the recent peak, signalling limited room for a sharp rebound. The pair’s close on 1 November at 177.87 further underlines its susceptibility to BoJ moves.

Market sentiment and technical backdrop

  • Technical resistance: 178.00 – a near‑week‑high that could act as a barrier if the BoJ raises rates.
  • Support level: 176.50 – the last swing low, offering a potential floor if the yen weakens further.

Analysts note that the euro’s weakness is compounded by muted earnings in the European equity market, where automotive stocks have provided a modest lift but are unlikely to offset the broader euro‑yen depreciation trend.

Broader implications

A BoJ rate hike would reinforce the yen’s safe‑haven status, further pressuring the euro. Conversely, if the ECB maintains its dovish stance, the euro may struggle to regain ground against the yen. Market watchers should therefore monitor BoJ’s next policy meeting and any ECB commentary for signs of policy divergence.

In short, the euro‑yen pair remains in a precarious position: the BoJ’s potential tightening is the primary catalyst for the 177.00‑level drift, and the ECB’s steady outlook offers a backdrop that could sustain euro weakness. Traders will need to watch for any BoJ signals that could trigger a decisive shift in the pair’s trajectory.