EUR/JPY retreats from YTD high as ECB and BoJ adopt a cautious tone

• EUR/JPY edges lower after reaching a new YTD high at 167.62.
• Eurozone sentiment supports the Euro amid a cautious ECB tone.
• The Japanese Yen remains pressured as the Bank of Japan adopts a dovish tone.

The Euro (EUR) is pulling back against the Japanese Yen (JPY) on Tuesday after hitting a year-to-date high and its strongest level since July. 

EUR/JPY reached an intraday peak of 167.62 before slipping to 167.00 at the time of writing, as traders locked in gains near overbought levels.

The dip comes as investors digest cautious messaging from both the European Central Bank (ECB) and the Bank of Japan (BoJ).

Monetary signals from the ECB and the BoJ reflect rising global risks

On the ECB side, France's central bank governor, François Villeroy de Galhau, urged "agile pragmatism," citing rising Oil prices and the Israel-Iran conflict. 

Meanwhile, the Bank of Japan (BoJ) maintained its policy rate at 0.5% on Tuesday, a widely anticipated decision. In response to rising uncertainty, the BoJ announced it would gradually slow its bond tapering process through April 2026. 

This cautious strategy reflects mounting concerns over a persistently weak Yen, inflation that remains above target, and broader risks to the global economy. BoJ Governor Kazuo Ueda warned that "the fallout from trade uncertainty could weigh on companies' winter bonus payments and wage negotiations next year," highlighting how international policies are influencing domestic policy calibration.

Eurozone sentiment supports the Euro amid a cautious ECB tone

On the data front, Eurozone sentiment continues to climb. Germany's ZEW Economic Sentiment Index surged to 47.5 in June, easily beating forecasts of 35.0. The Eurozone-wide reading also topped expectations at 35.3. These stronger-than-expected prints helped support the Euro despite ECB caution.

EUR/JPY faces resistance as overbought signals emerge

Technically, EUR/JPY remains in an uptrend but is stalling at significant resistance near 167.60. The pair is still trading well above the 20-day Simple Moving Average (SMA) at 164.37. However, a Relative Strength Index (RSI) reading of 68 suggests a potential cooling-off period may be ahead. A drop below the 164.59-164.37 support zone could spark a deeper pullback, while a push above 167.62 opens the door to 168.90.

EUR/JPY daily chart