EUR/JPY Price Forecast: Gains traction above 185.00, bullish signals keep uptrend intact
- EUR/JPY gains ground to near 185.20 in Thursday’s early European session.
- The constructive outlook of the cross prevails above the 100-day SMA, with bullish RSI momentum.
- The first upside barrier emerges at 186.32; the initial support level to watch is 185.10.
The EUR/JPY cross gathers strength to around 185.20 during the early European session on Thursday. The Japanese Yen (JPY) softens against the Euro (EUR) amid disappointing Japanese Gross Domestic Product (GDP) data. Traders brace for Japan’s National Consumer Price Index (CPI) inflation report, which will be published on Friday.
Japan’s economic growth in the second quarter (Q2) fell short of forecasts, with GDP expanding 0.3% versus a 0.5% growth prior. The market consensus was for 0.5%. “There were views that Japan’s economy might even slip into negative growth due to higher import prices and supply constraints driven by the aggravated Iran situation,” said Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute.
However, growing market bets that the Bank of Japan (BoJ) could raise interest rates as early as September 2026 might help limit the JPY’s losses. Overnight index swaps are pricing in an about 80% chance of a BoJ rate hike in the next policy meeting, according to Reuters.
Danske Bank sees scope for only one more ECB rate hike
Analysts at Danske Bank maintain a restrained view on the remaining tightening cycle, reiterating that they "continue to expect only one further 25bp rate hike from the ECB." This forecast reflects their assessment that, beyond a single additional move, the case for further policy tightening is likely to diminish.
Technical Analysis: EUR/JPY retains a bullish tone above the 100-day SMA
In the daily chart, EUR/JPY holds a bullish near-term bias as price remains above the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, suggesting underlying demand on dips. The Relative Strength Index (14) around 56.75 stays comfortably above the neutral 50 line, hinting at constructive momentum while the exchange rate consolidates just under recent highs.
On the topside, immediate resistance emerges at the June 17 high of 186.32. The next hurdle is seen at the upper Bollinger Band around 187.50, which caps the current range and marks the next objective for bulls.
On the downside, initial support aligns with the 100-day SMA at 185.10, followed by the Bollinger middle band near 184.00. A deeper pullback would expose the August 10 low of 182.70, then the lower Bollinger Band down at 180.55, where stronger buying interest is likely to appear if the broader uptrend is challenged.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
What key factors drive the Japanese Yen?
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
How do the decisions of the Bank of Japan impact the Japanese Yen?
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
How does the differential between Japanese and US bond yields impact the Japanese Yen?
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
How does broader risk sentiment impact the Japanese Yen?
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.