EUR/JPY rebounds off moving average support despite Eurozone inflation miss

• EUR/JPY heads toward 164.00 as demand for the safe-haven Yen weakens.
• Inflation data out of the Eurozone misses estimates ahead of Thursday's ECB rate decision, with a 25-basis-point rate cut already priced into the Euro.
• Bank of Japan (BoJ) remains committed to maintaining a careful balance between interest rates and economic growth, limiting the Yen's gains.

The Euro (EUR) has been gaining strength against the Japanese Yen (JPY), traditionally seen as a safe haven, on Tuesday. 

At the time of writing, EUR/JPY is trading above the 20-day Simple Moving Average (SMA) support level of 163.31, with resistance firming at 164.00.

This follows the release of Eurozone inflation data, which was softer than anticipated, and cautious signals from the Bank of Japan's (BoJ) Governor regarding future interest rate expectations.

On Tuesday, the preliminary Core Harmonized Index of Consumer Prices (HICP) for the Eurozone indicated continued easing for May. The core HICP rose by 2.3% YoY, down from 2.7% in April and beneath the forecasted 2.5% increase. 

As inflation trends closer to the European Central Bank's (ECB) target of 2%, the ECB appears poised to consider a rate cut during its monetary policy meeting on Thursday. Analysts are factoring in the likelihood of a 25-basis-point (bps) rate cut before solidifying their outlook for interest rates for the rest of the year.

During the Asian trading session, BoJ Governor Kazuo Ueda addressed market participants, maintaining a hawkish position and hinting at possible interest rate hikes in response to rising inflation. According to Reuters, he stated that the "BoJ anticipates continuing to raise rates if underlying inflation reaches the projected 2%." However, he also emphasized that tariffs and trade disputes could pose risks to the economic outlook, highlighting the need for a careful balance between monetary policy and economic growth.