EUR/JPY rose for a second day as the Yen weakened, trading at 184.47 at the time of writing. The pair was near two-month highs in the 184.65–184.75 range, after reaching 184.50.
The Yen fell amid concern about the economic effects of high Oil prices if Iran does not reopen the Strait of Hormuz soon. Japan’s status as a major Oil importer increased focus on energy-driven price pressures.
Inflation And Policy Expectations
Underlying inflation in Japan has reached the Bank of Japan’s 2% target and is expected to rise further if the war in Iran continues. Futures markets price a 50% chance of a BoJ rate hike in April and have almost fully priced a hike before the summer.
The European Central Bank is also expected to raise rates soon, with April mentioned as a possible timing. ECB Governing Council member Dimitar Radev said more data are needed before deciding on April.
A correction dated April 7 at 09:05 GMT stated the pair reached 184.50, not 154.50, and that 184.75 is the two-month high, not March’s high.
With the EUR/JPY pair pushing towards the 184.75 level, we see an immediate opportunity based on continued Yen weakness. The pressure from elevated oil prices, with Brent crude recently trading above $98 a barrel, is unlikely to ease in the coming days, suggesting further upside potential. Traders could consider buying near-term call options to capitalize on this momentum while capping downside risk.
Options Positioning Ahead Of Central Banks
The market is now a coiled spring ahead of potential rate hikes from both the Bank of Japan and the European Central Bank. Recent data confirms this pressure, with Japan’s latest core inflation figure for March hitting 2.2% and the Eurozone’s flash estimate at 2.6%, both stubbornly above target. This creates significant event risk around the April central bank meetings, where monetary policy could either converge or diverge sharply.
We must remember the precedent set last year. From our perspective in 2025, we saw a similar setup where expectations for a BoJ hike were high, but the bank ultimately held back, leading to a significant and rapid depreciation of the Yen. This history makes us cautious about being too committed to a BoJ hike actually materializing this month as priced in.
Given this pronounced uncertainty, strategies that profit from a large price move, regardless of direction, are prudent. We believe establishing long straddles or strangles on EUR/JPY, using options expiring after the key central bank meetings, is a sensible approach. This positions us to benefit from the significant volatility we anticipate, whether the pair breaks decisively higher or reverses sharply lower.
