The EUR/JPY exchange rate has made small gains above 183.00, ending a three-day losing streak. This uptick results from a weaker Japanese Yen and positive expectations for the Eurozone economy, along with a strict stance from the European Central Bank (ECB). Even with the gain, EUR/JPY is still close to its two-week low, trading around 183.20, which is just a slight increase of less than 0.10% for the day. Japan’s financial challenges and unclear interest rate hikes from the Bank of Japan (BoJ) are weakening the Yen, which is benefiting the Euro.

Euro Gains from A Weak US Dollar

The Euro is gaining support from a weaker US Dollar and the ECB’s decision to keep interest rates steady, maintaining a 2% deposit rate until 2025. German inflation has dropped from 2.6% to 2%, and the focus is now on the upcoming Eurozone CPI report. While there is hope for further growth in EUR/JPY, there is still caution due to potential government actions that may prevent further weakening of the Yen. The BoJ will need clear buying signals to prove that it has stopped the Yen’s decline from its record highs. The Core Harmonized Index of Consumer Prices (HICP) measures price changes in the European Monetary Union. A higher HICP usually boosts the Euro, with the next report set for January 7, 2026, showing a forecast of 2.4%.

Today’s Focus: Eurozone Inflation Report

Today, the EUR/JPY pair is recovering, moving above 183.00 after several days of losses. This shift seems to come from differences in central bank policies, where the ECB is resolute while the BoJ is cautious. This difference in interest rates makes holding Euros more appealing than holding Yen. The main focus today is the Eurozone inflation report. Strong economic growth in 2025 allowed the ECB to keep its deposit rate steady at 2.0% in its last meetings. If today’s core inflation reading forecasts 2.4% or more, it will strengthen the idea that the ECB will not consider rate cuts soon. The Yen’s weakness comes from the BoJ’s unclear guidance, following a small rate hike in mid-2025. Although Japan’s Q4 2025 GDP improved slightly to 0.4% quarter-over-quarter, investors are still unsure about the timing of the next policy decision. This uncertainty is pushing investors to borrow low-yielding Yen to invest in higher-yielding Euros. For traders dealing in derivatives, this situation supports a positive outlook for EUR/JPY in the coming weeks. Buying call options with strike prices around 184.00 or 184.50 could be a good strategy to take advantage of potential increases. Today’s inflation data will be crucial for this strategy; a number higher than expected could boost the pair’s upward trend. However, it’s important to be cautious about possible Japanese government intervention, especially as the pair nears last year’s all-time highs around 185.00. Given this risk, using a bull call spread—buying one call option and selling another at a higher strike price—might be a smarter approach, as it lowers costs and defines risk. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now