EUR/JPY is trading with modest gains above 183.00 as traders await the upcoming Eurozone CPI report

• EUR/JPY gains positive momentum, breaking a three-day losing streak amid a weaker Japanese yen.
• Uncertainty over the timing of the next Bank of Japan rate hike, along with positive risk sentiment, weigh on the yen.
• Meanwhile, hawkish bets on the ECB and a softer US dollar support the euro, providing further upside to the pair.

During Wednesday’s Asian session, the EUR/JPY pair attracted some buying interest, ending a three-day losing streak amid a generally weaker Japanese yen. However, prices remain close to the two-week low reached on Monday, currently trading around 183.20, up just under 0.10% for the day.

The yen continues to face pressure due to Japan’s fiscal concerns, a prevailing risk-on sentiment, and uncertainty over the timing of the Bank of Japan’s next rate hike, all of which provide support for EUR/JPY. Meanwhile, the euro benefits from a softer US dollar and hawkish signals from the European Central Bank, which showed no intention of cutting interest rates further.

Investors widely expect the ECB to maintain a steady 2% deposit rate throughout its eight meetings this year, supported by surprisingly strong economic growth across the Eurozone in 2025. Additionally, inflation in Germany—the region’s largest economy—slowed more than anticipated, dropping from 2.6% to 2% in December. Market attention now turns to the preliminary Eurozone consumer inflation data scheduled for release later today.

Despite this supportive fundamental backdrop for further gains in the EUR/JPY pair, caution remains warranted. Concerns that government authorities might intervene to curb further yen weakness suggest bullish traders should remain careful. Moreover, expectations that the Bank of Japan will continue its policy normalization path mean it’s wise to wait for solid follow-through buying before confirming that the two-week corrective pullback from the all-time high has ended.

Sources: Fxstreet