EUR/JPY Price Forecast: Edges lower below 185.00, while near-term bullish bias holds
- EUR/JPY posts modest losses near 184.95 in Thursday’s early European session.
- The cross keeps a bullish near-term tone, but further consolidation cannot be ruled out amid neutral RSI momentum.
- The first upside barrier is seen at 185.00; the initial support level to watch is 184.90.
The EUR/JPY cross trades on a negative note around 184.95 during the early European session on Thursday. Eurozone inflation fell more than expected in June, easing pressure on the European Central Bank (ECB) to raise rates at its next meeting on July 23. This, in turn, could weigh on the Euro (EUR) against the Japanese Yen (JPY).
Data released by Eurostat on Wednesday showed that Eurozone inflation, as measured by the Harmonized Index of Consumer Prices (HICP), dropped to 2.8% YoY in June from 3.2% in May. This figure came in below the consensus of 3.0%.
Morgan Stanley economists said softer Eurozone June inflation could also “lower the bar a touch for the ECB to be on hold in September,” adding that energy pressures likely had a “limited” direct impact on eurozone prices.
Following Wednesday’s print, traders continued to anticipate the ECB to deliver another quarter-point rate rise by the end of this year, according to Morningstar.
Technical Analysis:
In the daily chart, EUR/JPY holds above the Bollinger Bands middle line and the 100-day moving average, keeping a mildly bullish near-term tone as price gravitates near recent highs. The Relative Strength Index (14) hovers around 50, suggesting balanced momentum and favoring a continuation of range-bound gains rather than an impulsive breakout.
On the topside, immediate resistance is located at the 185.00 psychological level, en route to the June 30 high of 185.86. The next hurdle emerges at the Bollinger Bands upper band near 186.15, where bullish attempts could meet profit-taking.
On the downside, initial support is seen at the Bollinger middle band at 184.90, followed by the 100-day moving average at 184.65; a deeper pullback would expose the lower Bollinger band support around 183.65.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
What is the Euro?
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
What is the ECB and how does it impact the Euro?
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
How does inflation data impact the value of the Euro?
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
How does economic data influence the value of the Euro?
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
How does the Trade Balance impact the Euro?
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.