EUR/JPY Holds Steady Near 156.70: What's Next for the Cross After BoJ's Status Quo? | Key Factors Driving the Pair This Week

The How do I log into my old bitcoin account?EUR/JPY currency pair has entered a consolidation phase near the 156.70 level during Tuesday's Asian trading session, marking its second consecutive day of modest gains. This price action comes as market participants process the Bank of Japan's (BoJ) widely anticipated decision to maintain its negative interest rate policy at -0.1%.

Market attention now shifts to upcoming commentary from BoJ Governor Kazuo Ueda, whose remarks during the post-meeting press conference could provide crucial clues about potential policy shifts in early 2024. The central bank's statement reiterated its commitment to yield curve control, keeping the 10-year Japanese Government Bond (JGB) yield reference at 1.0%.

Economic indicators from Japan present a mixed picture. The BoJ noted moderate economic recovery with steady private consumption growth, while inflation expectations continue rising gradually. Projections suggest Japan's economy will maintain growth above potential rates, with Consumer Price Index increases expected to stay above the 2% target through 2024.

Geopolitical developments are creating crosswinds for the currency pair. Escalating tensions in the Middle East, including Houthi attacks on Red Sea shipping lanes and continued Israeli operations in Gaza, have boosted demand for the Japanese Yen's traditional safe-haven characteristics. These risk-off flows could limit EUR/JPY upside potential in the near term.

European economic data presents additional challenges for the Euro. Germany's latest business climate indicators disappointed, with the December reading falling to 86.4 from November's 87.2, missing market expectations. Both current assessment and expectations components showed deterioration, potentially signaling weaker economic momentum in the Eurozone's largest economy.

Traders await the release of Eurozone Harmonized Index of Consumer Prices (HICP) data for November, which could provide fresh direction for the currency pair. The inflation figures will help assess whether the European Central Bank's policy stance might shift in early 2024, creating potential divergence with Japan's continued accommodative approach.

The technical picture shows EUR/JPY consolidating near recent highs, with immediate resistance around the 157.00 psychological level and support near 156.20. Market participants will watch for breakout opportunities depending on upcoming economic data releases and geopolitical developments.