EUR/JPY Remains Subdued Near 183.00 as BoJ Policy Normalisation Gains Traction

EUR/JPY was subdued around the 183.00 handle during Asian trading hours, with the Japanese yen finding support as investors grow more confident that the Bank of Japan will continue moving away from ultra-loose monetary policy. Price action has remained contained, reflecting a balance between policy-driven yen support and softer domestic fundamentals in Japan.

Comments earlier this week from Kazuo Ueda reinforced expectations that the Bank of Japan will continue adjusting policy if economic and inflation trends evolve in line with forecasts. Ueda emphasised that gradually reducing monetary accommodation is necessary to achieve sustainable growth, with wages and prices expected to rise moderately over time.

Japanese Wage Data Highlights Policy Tension

Recent Japanese labour data has added nuance to the outlook. Labour Cash Earnings rose just 0.5 percent year on year in November, marking the weakest wage growth in nearly four years and sharply slowing from October’s pace. The slowdown was largely driven by a steep drop in bonus payments, while real wages continued to fall as inflation outpaced income growth.

While the data underscores challenges facing Japan’s domestic economy, it has not been enough to significantly weaken the yen, as markets remain focused on the broader policy shift underway at the central bank.

Geopolitical developments in the region have also entered the equation. Rising tensions between Japan and China, including restrictions on certain exports, have added a layer of uncertainty that could intermittently influence risk sentiment and yen demand.

Euro Struggles to Find Support from Inflation Data

On the euro side, macro data has provided little directional impetus. Preliminary Eurozone Harmonised Index of Consumer Prices data showed inflation rising 2.0 percent year on year in December, in line with expectations and slightly slower than the previous month.

Core inflation eased marginally, reinforcing the view that price pressures across the bloc continue to cool gradually. With no major upside surprises, the data has done little to shift expectations around European Central Bank policy, leaving the euro lacking a clear catalyst for strength.

EUR/JPY Technical Outlook

From a technical perspective, EUR/JPY continues to trade within a tight consolidation range. Price is hovering above support near 182.80, a level that has repeatedly limited downside moves in recent sessions. As long as this area holds, deeper corrective declines appear contained.

Immediate resistance is located around 183.50, where sellers have capped upside attempts. A sustained break below 182.80 would confirm a bearish corrective phase, exposing downside targets at 182.30 and 181.75. Conversely, a decisive move above 183.50 would ease downside pressure and open the way toward 183.85, followed by a retest of the former channel support area.

Momentum indicators remain mixed, reinforcing the view that EUR/JPY is currently in a waiting phase rather than trending decisively. The broader outlook remains neutral unless price breaks convincingly out of the current range.

EUR/JPY Outlook

In the near term, EUR/JPY is likely to remain range-bound as traders balance Bank of Japan policy expectations against weak domestic data and a lack of strong euro-side catalysts. A clearer directional signal is expected to emerge once price breaks either side of the 182.80–183.50 range.

Until then, the pair is likely to continue fluctuating within this corridor as markets await stronger macro or policy-driven cues.

Writer’s Trade Idea: My preferred approach is to remain neutral near current levels, looking to sell a confirmed break below 182.80 targeting 182.30, or buy a sustained move above 183.50 targeting 183.85, with tight risk controls on either setup.