The Japanese Yen showed strength as investors became more cautious, leading to declines in global stock markets. On the other hand, the Euro faced challenges from mixed signals in the Eurozone, despite some economic data that was slightly better than expected. The Bank of Japan’s careful notes prevented the Yen from rising significantly, even with warnings regarding its excessive weakness.

Stability Amidst Volatility

The EUR/JPY traded steadily at around 176.50, marking a 0.10% increase for the day after hitting a two-week low of 175.70. Investors viewed the Yen as a safe haven due to concerns about economic growth and US trade policies, which limited the Euro’s chances to gain from positive data. The Eurozone’s service sector showed improvement, with the HCOB Services PMI rising to 53 in October. Germany’s index also climbed to 54.6, the highest in more than a year. However, the Eurozone’s Producer Price Index (PPI) fell by 0.1% month-over-month and 0.2% year-over-year, indicating weaker inflation for the currency. The October meeting minutes from the Bank of Japan revealed a careful stance on policy changes. A Japanese currency official hinted at possible interventions if the Yen strays too far from its fundamentals. Meanwhile, the Euro saw a slight uptick against the Canadian Dollar, showing varied performance against other major currencies. We are witnessing a classic tug-of-war. Risk-averse sentiment is boosting the Yen, but the Bank of Japan remains cautious about changing policies. This situation suggests that volatility will be the dominant trade factor in the upcoming weeks. Recent data reveals that currency volatility indices have increased by over 15% in the past month, supporting the idea of buying options like straddles to capture significant price movements.

Capped Upside for EUR/JPY

The explicit warning from Japan’s leading currency official is important, as it refers back to interventions in 2022 and 2024. This creates a psychological limit on how high EUR/JPY can rise, especially as the market remembers how swiftly officials acted in the past. We believe that selling out-of-the-money call options or creating bear call spreads could capitalize on this restricted upside. Though the Eurozone’s service data was a positive sign, the drop in producer prices is a more concerning signal. This weakness in inflation was confirmed by a recent Eurostat report from October 2025, showing overall inflation decreasing to 1.9%, just below the ECB’s target. Consequently, traders might consider buying EUR/JPY put options to bet on a decline driven by a weaker Euro, regardless of Yen fluctuations. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now