The euro/yen exchange rate was hovering around 184.95 in early European trading on Thursday, reflecting a downturn. In June, inflation in the Eurozone dropped more significantly than anticipated, easing concerns for the European Central Bank (ECB) regarding further interest rate hikes in its upcoming meeting on July 23. This decline could impact the euro’s position against the Japanese yen.
According to Eurostat data released on Wednesday, the Harmonized Index of Consumer Prices (HICP) indicated a decrease in Eurozone inflation to 2.8% year-on-year for June, a drop from May’s 3.2%. This figure was also lower than the expected consensus of 3.0%.
Economists at Morgan Stanley noted that this easing of inflation in the Eurozone could potentially “slightly lower the bar” for the ECB to choose to maintain its current policy in September. They also mentioned that the influence of energy costs on Eurozone prices is likely to be “limited”.
After the report on Wednesday, traders continued to anticipate a quarter-point increase in interest rates by the ECB before the year ends, according to Morningstar.
Technical analysis:
Looking at the daily charts, EUR/JPY remains positioned above the midline of the Bollinger Bands and the 100-day moving average, suggesting a somewhat bullish sentiment in the short term as prices trend toward recent highs. The Relative Strength Index (14) is around 50, indicating a balance in momentum that favors a continued range-bound increase rather than a sharp breakout.
In terms of resistance levels, the immediate barrier is seen at the psychological mark of 185.00, heading toward the June 30 peak of 185.86. Another obstacle seems to be in the upper Bollinger Bands vicinity at around 186.15, where bullish attempts might lead to profit-taking.
On the support side, initial backing is spotted at the middle Bollinger Band at 184.90, followed by the 100-day moving average at 184.65. A more pronounced drop could reveal support near the lower Bollinger Band at around 183.65.
