The EUR/JPY currency pair has extended its rally for the third consecutive day, poised to finish the week with solid gains as traders anticipate key economic releases and central bank actions [1]. Despite hawkish forward guidance from the European Central Bank (ECB), the Euro did not fully capitalize on these signals, even as Bloomberg reported that ECB officials are prepared to raise rates in September [1]. ECB President Christine Lagarde emphasized that inflation risks are tilted to the upside while growth risks are to the downside, reiterating the ECB's commitment to ensuring inflation returns to its 2% target in the medium term. Lagarde also stated that the ECB would remain data-dependent and would not pre-commit to a specific interest rate path [1].
Meanwhile, the Japanese Yen weakened less than expected against the Euro, as investors remain cautious about potential intervention by the Bank of Japan (BoJ) in the foreign exchange markets to support the Yen [1]. On Friday, market participants are closely watching the release of Japanese inflation data, with the National CPI excluding Fresh Food expected to rise from 1.4% to 1.6% year-on-year. Additionally, updates on Jibun Bank Flash PMIs are anticipated, with the manufacturing activity index forecasted to ease from 54.8 to 54.5 [1].
In the Eurozone, traders are digesting HCOB Flash PMIs for Germany, France, and the EU. The EU’s HCOB Manufacturing PMI is expected to drop slightly from 51.4 to 51.3, while the Services PMI is projected to improve but remain in contractionary territory, rising from 49.4 to 49.8 [1].
From a technical perspective, the EUR/JPY daily chart indicates bullish momentum, supported by a rising Relative Strength Index (RSI) and a trendline break that has shifted market structure from sideways to an uptrend. For further bullish continuation, EUR/JPY needs to clear the April 30 high at 187.56, with subsequent targets at 187.95 (YTD high), 188.00, and 190.00. On the downside, sellers would need to break Thursday’s low at 186.05, with further support at the 50 and 100-day SMAs (185.16/02) and the 200-day SMA at 183.44 [1].
The Japanese Yen was the strongest against the Swiss Franc this week, according to a table showing percentage changes against major currencies [1].
CONCLUSION
The EUR/JPY pair is experiencing sustained upward momentum, driven by ECB hawkishness and cautious sentiment around BoJ intervention. Upcoming economic data releases and technical levels will be key for traders. Overall, market sentiment is moderately positive, with the Euro maintaining strength against the Yen amid central bank policy signals.