Ella 
In the Asian market on Monday, the EUR/JPY cross trade attracted some buyers and rebounded nearly 60 pips from the intraday low, but failed to extend the positive trend of the day. EUR/JPY is currently trading around 158.15-158.20, up less than 0.10% on the day.
The yen weakened on news that the Bank of Japan (BoJ) will buy an unlimited amount of government bonds with remaining maturities of five to 10 years at a fixed rate. This became a key factor supporting the EUR/JPY cross. That said, fears of intervention by Japanese authorities, and generally weak risk sentiment in markets, have limited losses in the safe-haven yen and gains in EUR/JPY, at least for now.
Sentiment remains fragile amid growing concerns over deteriorating economic conditions in China. Also, the People’s Bank of China (PBoC) cut interest rates less than expected, signaling limited policy support for the economy despite concerns about a deepening crisis in China’s property sector, further denting investors’ appetite for riskier assets. However, downside in EUR/JPY crosses remains capped amid the BoJ’s dovish stance.
It is worth noting that the Bank of Japan is the only central bank in the world to maintain negative interest rates. In contrast, the European Central Bank (ECB) has raised borrowing costs by a combined 425 basis points since last July and is expected to raise rates one more time before the end of the year. This should continue to be a “tailwind” for EUR/JPY crosses, so investors need to be cautious before taking a position on EUR/JPY’s recent pullback from last week’s multi-digit highs.
Broader risk sentiment in the absence of any relevant market economic data on Monday will drive demand for the safe-haven yen and provide some impetus to the EUR/JPY cross. Market focus will then turn to the Bank of Japan’s core inflation announcement on Tuesday and the flash Eurozone PMI release on Wednesday. However, the aforementioned fundamental backdrop favors the bulls and suggests the EUR/JPY has the least resistance to the upside.
