• EUR/JPY steadily advances closer to a multi-year peak during the Asian session on Thursday.
• The divergent BoJ-ECB policy stance continues to act as a tailwind and remains supportive.
• Speculations that the ECB will end its rate-hiking cycle soon could cap any meaningful gains.

The EUR/JPY cross trades with a positive bias during the Asian session on Thursday and climbs back closer to the multi-year peak touched in July, with bulls now awaiting a sustained strength beyond the 158.00 mark before placing fresh bets.

Data released earlier this week showed that real wages in Japan fell for a 15th straight month, while nominal pay growth also slowed in June. This, in turn, reaffirmed market expectations that the Bank of Japan (BoJ) will stick to its ultra-easy monetary policy settings, which continue to undermine the Japanese Yen (JPY) and acts as a tailwind for the EUR/JPY cross. It is worth recalling that the BoJ has emphasised that a sustainable pay hike is a prerequisite to consider dismantling its massive monetary stimulus.

Furthermore, the Japanese central bank, in the Summary of Opinions from the July 28 meeting, said it still has a significantly long way to go before revising its stance on the negative interest rate policy. This marks a big divergence in comparison to a hawkish stance adopted by other major central banks, including the European Central Bank (ECB), which has raised borrowing costs by a combined 425 bps since last July. This, along with the overnight bounce in European bond yields lends support to the Euro and the EUR/JPY cross.

That said, rising bets that the ECB will pause in September, in the wake of easing inflationary pressures and mounting recession fears, hold back traders from placing aggressive bullish bets around the shared currency. Apart from this, concerns about the worsening economic conditions in China benefit the JPY's relative safe-haven status and contributes to keeping a lid on the EUR/JPY cross. This makes it prudent to wait for some follow-through buying beyond the 158.00 mark before positioning for any further gains.

Technical levels to watch