During the early hours of Wednesday’s European trading, the EUR/JPY pair gained traction, hovering around 185.20. The euro experienced a slight uptick against the Japanese yen, fueled by growing expectations that the European Central Bank (ECB) will increase interest rates in its upcoming policy meeting on Thursday.
The ECB is poised to raise its primary interest rate for the first time in nearly three years, leading the way among central banks adjusting policy in response to rising energy costs stemming from ongoing tensions in the Middle East. Markets have already factored in a subsequent 25 basis point rate hike for September, although economists anticipate a cautious approach from the ECB, emphasizing data dependence without committing to a definitive strategy.
“Lagarde might provide some guidance on the ECB’s future actions following some unclear communication about interest rate expectations in March,” noted Simona Delle Chiaie, who serves as the chief euro zone economist at Bloomberg. Remarks deemed hawkish from ECB officials could potentially drive the euro’s value against the yen upwards in the near term.
Technical analysis:
On the daily chart, the EUR/JPY maintains a stable position just above the middle band of the Bollinger Bands and clearly above its 100-day simple moving average, indicating a constructive short-term outlook, although it suggests some underlying bearish demand. The Relative Strength Index (14) sits at 49.99, which is effectively neutral, implying a pause rather than a loss of momentum after a recent rise.
Looking at the upward potential, the immediate resistance level is at the Bollinger Upper Band located around 186.05, which might attract new selling interest. The next resistance seems to be at the February 9th peak of 186.24, followed closely by the January 23rd high of 186.88. On the downside, initial support is observed at the Bollinger Middle Band around 185.15, preceding the 100-day SMA at 184.50. A deeper decline towards the Lower Bollinger Band at around 184.25 could entice buyers, provided the overall bullish structure remains intact.
