EUR/JPY is under pressure as the Japanese Yen strengthens due to speculations of possible intervention. The Yen is gaining strength as expectations grow that the Bank of Japan (BoJ) may raise interest rates next month. Meanwhile, the Euro is stabilizing because of the European Central Bank’s cautious approach. Currently, the currency pair is trading around 181.00. With US markets closed for Thanksgiving, there might be a chance for Japanese action. **Speculation Regarding BoJ’s Policy Shift** Speculations about a shift in BoJ’s policy come amid worries about inflation and a weakening Yen. The potential for intervention has already stopped further declines in the Yen. Traders think the BoJ may move away from its very loose monetary policy due to rising inflation and political factors. Even though the Yen is gaining strength, the Euro remains stable thanks to the ECB’s consistent policy outlook. ECB officials are cautiously optimistic about growth and interest rates, with no big policy changes expected in the near term. Important data, such as consumer and business confidence surveys and inflation expectations, are eagerly awaited. The BoJ’s previous expansive monetary policies have affected the Yen, and the anticipated policy shift is influencing currency movements in the markets. There is strong pressure on EUR/JPY around the 181.00 mark, created by the Yen’s strength. This situation, combining possible Japanese intervention with a stable European Central Bank, could lead to significant volatility. Traders should brace for sharp price movements in the upcoming weeks. The talk of intervention is not unfounded, recalling the massive actions taken in 2022 and 2024 to support the Yen. With Japan’s core inflation at about 2.8%, above the BoJ’s target, a rate hike in December seems more likely. This marks a significant change from the negative interest rates that ended in March of last year. **Volatility and Profit Strategies** Given the increasing risks, buying EUR/JPY put options seems wise. This can help hedge long positions or bet on further Yen strength. Historically, low liquidity during the US Thanksgiving holiday raises the chances of sharp price swings, making long volatility strategies like straddles potentially rewarding. Implied volatility for Yen pairs is likely to increase, so acting quickly may be beneficial. However, the Euro’s stability may limit the potential for a sharp drop. The European Central Bank is keeping its deposit rate steady at 3.5%, while Eurozone inflation hovers around 2.4%, indicating no desire for rate cuts. This significant interest rate gap continues to give support to the Euro against the Yen. Create your live VT Markets account and start trading now.

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