EUR/JPY climbs to over two-week top, around 173.00 amid notable JPY supply

• EUR/JPY attracts buyers for the fourth straight day amid a broadly weaker JPY.
• The BoJ rate hike uncertainty and the upbeat market mood undermine the JPY.
• The BoJ-ECB policy divergence warrants caution for aggressive bullish traders.

The EUR/JPY cross prolongs its uptrend for the fourth consecutive day - also marking the sixth day of a positive move in the previous seven - and advances to over a two-week high during the Asian session on Wednesday. Spot prices now look to build on the momentum further beyond the 173.00 mark amid the prevalent selling bias surrounding the Japanese Yen (JPY).

Against the backdrop of the uncertainty over the likely timing of the next interest rate hike by the Bank of Japan (BoJ), the risk-on mood continues to undermine the safe-haven JPY and acts as a tailwind for the EUR/JPY cross. Investors now seem convinced that the prospects for further policy normalization by the BoJ could be delayed further amid domestic political uncertainty and the potential negative impact of higher US tariffs on the economy.

Meanwhile, data released this Wednesday showed that Japan's Corporate Goods Price Index (CGPI) climbed 2.6% in July from a year earlier, down from the previous month's 2.9%. This comes on top of a fall in Japan's real wages for the sixth straight month in June and fuels concern about a consumption-led recovery. Moreover, an extension of the US-China trade truce and the US-Russia summit aimed at ending the war in Ukraine weighs on the JPY.

The shared currency, on the other hand, benefits from the post-US CPI US Dollar (USD) weakness and turns out to be another factor that contributes to the EUR/JPY pair's ongoing positive move. Moreover, expectations that the European Central Bank (ECB) will keep interest rates steady for the rest of 2025 underpin the Euro. This, however, still marks a significant divergence in comparison to bets for an imminent BoJ rate hike by the year-end.

In fact, the BoJ revised its inflation forecast at the end of the July meeting and reiterated that it will raise interest rates further if growth and inflation continue to advance in line with its estimates. This might hold back the JPY bears from placing aggressive bets. In the absence of any relevant market-moving economic releases, the fundamental backdrop warrants some caution before positioning for any further appreciating move for the EUR/JPY cross.