EUR/JPY Consolidates Gains Near 186.00

Summary:

EUR/JPY steadied near one-month highs as expectations of further ECB tightening supported the Euro, while uncertainty over Japan's pension fund reforms continued to weigh on the Yen.

Buy EURJPY

EXP

Trading

185.900

ENTRY

187.400

TGT

184.400

185.723 -0.060 -0.03%

Point

Flat

184.400

CLOSING

185.900

ENTRY

187.400

TGT

The Euro traded little changed against the Japanese Yen on Thursday, holding just below the 186.00 mark after climbing nearly 0.8% so far this week. The common currency remained supported by growing expectations that the European Central Bank (ECB) could deliver another interest rate hike later this year, while uncertainty surrounding Japan's pension fund investment plans continued to weigh on the Yen.

Although cautious market sentiment linked to renewed fighting in the Middle East provided some support for the Japanese currency, the Euro proved more resilient. The recent surge in oil prices has raised concerns about inflation, reinforcing expectations that the ECB may need to keep monetary policy tighter for longer.

In my view, monetary policy divergence remains the primary driver of EUR/JPY. Hawkish rhetoric from ECB officials continues to underpin the Euro, while fading optimism over Japan's proposed pension fund reforms has reduced demand for the Yen.

ECB policymakers maintained their firm stance this week, with Austrian central bank governor Marin Kocher stating the ECB stands ready to respond if inflation pressures intensify, while Bundesbank President Joachim Nagel reiterated that decisive action remains appropriate if necessary. Those comments have strengthened expectations of a further 25-basis-point rate increase in September.

Meanwhile, the Yen has struggled after reports suggested Japan has no immediate timetable for repatriating Government Pension Investment Fund (GPIF) assets. While the proposal initially boosted the currency, investors have become increasingly skeptical about how quickly those plans can be implemented, allowing sellers to regain control of the Japanese currency.

Technical Analysis

EUR/JPY continues to trade within a constructive bullish structure, with price reclaiming the 185.80–186.00 resistance zone after rebounding from the ascending trendline that has supported the pair since late June. On the 4-hour chart, buyers have regained control following a series of higher lows, suggesting that the broader uptrend remains intact despite recent bouts of volatility. The latest breakout above 185.80 signals improving bullish momentum, although the pair is now approaching an important supply zone near 187.40.

The ascending trendline, currently intersecting around the 184.50 area, remains the key dynamic support underpinning the recovery. As long as EUR/JPY continues to trade above both this trendline and the 184.40–184.60 demand zone, the bullish outlook remains favored. A decisive break below this support cluster would weaken the current market structure and expose a deeper decline toward 183.30, where previous buying interest emerged.

On the upside, bulls will be watching for a sustained move above 186.00 to confirm a continuation of the recent advance. Such a breakout would likely encourage fresh momentum buying and open the way toward the major resistance zone around 187.40, which marks the next significant upside objective on the chart.

Momentum indicators suggest that buying pressure is gradually improving rather than becoming overstretched. The Relative Strength Index (RSI) is likely holding in bullish territory around the mid-to-upper 50s, reflecting strengthening momentum without reaching overbought conditions. Meanwhile, the Moving Average Convergence Divergence (MACD) appears to be turning higher above its signal line, indicating that bullish momentum is rebuilding following the recent consolidation phase.

TRADE RECOMMENDATION

BUY EUR/JPY

ENTRY PRICE: 185.90

STOP LOSS: 184.40

TAKE PROFIT: 187.40

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Warren Takunda

Analysts

Warren Takunda, a seasoned finance leader specializing in the Middle East, is a trusted senior analyst with a proven track record. As head of the finance team, he excels in financial planning, analysis, and reporting. Warren's expertise in financial modeling and investment analysis delivers valuable insights to clients.

Rank

Articless

2753

Win Rate

63.48%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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