ECB Hike Steadies Euro Ahead of BoJ Rate Decision

The EUR/JPY currency pair regained its strength above 179.00 after the European Central Bank (ECB) raised its deposit rate by 25 basis points to 2.50%. This move was anticipated and helped stabilize the cross, which had fallen from above 180.00 in the past week.

The ECB's decision came as energy-driven inflation continued to rise, with Euro area inflation reaching 3.3% in August. The price of Brent crude oil also remained near $100 a barrel due to ongoing Middle East conflicts.

With the European Central Bank likely to maintain its hawkish stance, traders are bracing for volatility ahead of the Bank of Japan's (BoJ) September 18 meeting. A rate hike by the BoJ could strengthen the Yen and push EUR/JPY below its 20-period moving average of 178.81.

Derivative traders are advised to utilize long volatility strategies, such as straddles, and consider buying out-of-the-money put options targeting a pullback towards the 175.00 level to hedge against a Yen rally.