The EUR/JPY currency pair traded in negative territory around 184.60 during early European hours on Wednesday, reflecting a mildly bearish bias as it remained below the 100-day simple moving average (SMA) [1]. The Japanese Yen (JPY) strengthened against the Euro (EUR) following hawkish signals from the Bank of Japan (BoJ), with market participants closely watching Japan’s National Consumer Price Index (CPI) inflation report due on Friday [1]. Speculation is mounting that the BoJ may raise interest rates in the coming months, with Reuters reporting that the central bank is considering a rate hike as soon as September. Overnight index swaps are pricing in about an 80% probability of a move by that month [1].
Despite the Yen’s recent support, fiscal concerns in Japan are exerting some selling pressure. Prime Minister Sanae Takaichi’s proposal to cut the consumption tax on food to 1% for two years has raised market concerns, as the government has not identified an alternative revenue source and the measure is viewed as ineffective in combating inflation [1]. Strategists at DBS note a significant shift in Japan’s policy backdrop, highlighting that Prime Minister Takaichi has become more supportive of raising interest rates to stabilize the Yen amid lower approval ratings and rising cost-of-living pressures. This evolving political stance is seen as bolstering the case for a less accommodative policy mix, with authorities increasingly framing higher rates as a tool to shore up the Yen and address domestic concerns [1].
From a technical perspective, EUR/JPY maintains a mildly bearish near-term bias, trading below the 100-day SMA. The pair is confined within the Bollinger Bands, with price above the middle band support but well below the upper band resistance, suggesting limited upside potential. The Relative Strength Index (14) stands at 52.71, indicating neutral momentum. Key resistance levels are identified at the 100-day SMA near 185.10, the June 17 high of 186.32, and the upper Bollinger Band around 187.65. On the downside, immediate support is at the Bollinger middle band at 184.10, followed by the August 10 low of 182.70 and the lower band around 180.50, where a more pronounced corrective phase could find demand [1].
CONCLUSION
EUR/JPY is under mild bearish pressure as speculation of a BoJ rate hike intensifies, supported by shifting political dynamics and upcoming inflation data. However, fiscal uncertainties and technical resistance levels may cap further upside in the near term. Market participants are closely monitoring both policy signals and economic data for further direction.