EUR/JPY strives to break above 166.00 as Yen weakens ahead of BoJ policy

• EUR/JPY eyes above 166.00 amid weakness in the Japanese Yen.
• The BoJ seems incapable of hiking interest rates further.
• Investors await Eurozone macroeconomic data and the BoJ policy announcement.

The EUR/JPY pair aims to extend its rally above the immediate resistance of 166.00 in Tuesday's North American. The cross remains firm as the Japanese Yen (JPY) weakens across the forex domain amid expectations that the Bank of Japan (BoJ) is incapable of hiking interest rates further in the remaining year.

Market speculation for the BoJ to leave interest rates unchanged at their current levels by the year-end has strengthened after the outcome of Japan elections in which the ruling party failed to gain a majority. This has raised uncertainty over economic growth stability.

Meanwhile, investors await the BoJ's interest rate decision on Thursday in which the central bank is expected to leave its key borrowing rates unchanged at 0.25%. Therefore, investors will keenly focus on the interest rate guidance.

In the Eurozone region, investors await a string of macroeconomic data such as preliminary Gross Domestic Product (GDP) and the Harmonized Index of Consumer Prices (HICP) data for October, which will be published on Wednesday and Thursday, respectively. The economic data will significantly influence market expectations for the European Central Bank's (ECB) likely size for interest rate cuts in its last monetary policy meeting of this year in December.

A few ECB officials are worried about the risks of price pressures remaining below the bank's target of 2% for a longer period due to growing downside risks to economic growth.