EUR/JPY Extends Rally as ECB Hawkishness and BoJ Intervention Fears Drive Market

The EUR/JPY currency pair extended its rally for the third straight day, ending the week on a strong note. Despite the European Central Bank's (ECB) hawkish forward guidance, which hinted at a rate hike in September, the Euro didn't capitalize on the news as much as expected. In fact, investors remained cautious about the possibility of the Bank of Japan intervening in the foreign exchange markets to prop up the Japanese Yen.

According to ECB President Christine Lagarde's press conference, inflation risks are skewed towards the upside while growth is headed downwards. However, she emphasized that the central bank will keep monetary policy data-dependent and won't pre-commit to a specific interest rate path. This ambiguous stance has kept investors on their toes.

The Japanese Yen weakened less than expected against the Euro, with traders remaining wary of BoJ intervention. On Friday, market participants will be watching the release of Japanese inflation data, which is expected to show a rise in National CPI excluding Fresh Food from 1.4% to 1.6% YoY.

The technical outlook for EUR/JPY remains bullish, with momentum tilted towards the upside. A trendline break has shifted the market structure from sideways trading to an uptrend, and prices are drifting higher at a modest pace. To confirm this bullish continuation, the EUR/JPY needs to clear the April 30 high at 187.56.