EUR/JPY Extends Rally Despite Growing Threat of Japanese Currency Intervention

Summary:

EUR/JPY traded higher near 186.00 on Tuesday as investors increased bets on a more hawkish European Central Bank ahead of key Eurozone inflation data.

Buy EURJPY

End Time

CLOSED

186.050

ENTRY

188.500

TGT

185.350

185.585 -0.432 -0.23%

700

Points

Loss

185.350

185.346

CLOSING

186.050

ENTRY

188.500

TGT

EUR/JPY moved higher during Tuesday's European session, climbing toward the 186.00 mark as traders positioned for a potentially stronger Eurozone inflation reading and reassessed the outlook for European Central Bank policy.

Investor focus remains on the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) report due later in the day. Economists expect annual inflation to rise to 3.2% in May from 3.0% previously, a result that could reinforce expectations that the ECB will maintain a restrictive monetary stance for longer.

Supporting the Euro, ECB Executive Board member Isabel Schnabel delivered hawkish remarks on Monday, warning that the inflationary effects of the Iran conflict can no longer be ignored. Schnabel said price pressures have spread beyond energy markets, increasing the risk that inflation expectations become unanchored and potentially requiring further policy action.

The comments strengthened market expectations that ECB policymakers may remain cautious about easing monetary policy, providing fresh support for the single currency.

Meanwhile, the Japanese Yen continued to weaken, trading beyond 159.5 against the US Dollar and approaching the 160 level that previously prompted intervention by Japanese authorities. The move has renewed speculation that Tokyo could step into currency markets if depreciation accelerates further.

Japan's Finance Minister Satsuki Katayama said authorities remain concerned about volatility in oil and foreign exchange markets and are prepared to take appropriate action if necessary. However, she declined to comment on whether intervention is being actively considered.

Technical Analysis

From a technical standpoint, EUR/JPY continues to exhibit a strong bullish bias on the 2-hour timeframe, with the pair maintaining a sequence of higher highs and higher lows while remaining supported by a well-established ascending trendline. Price is currently consolidating around the 186.00 level after a recent advance, holding above a critical breakout zone near 185.80–185.90. This consolidation appears healthy and suggests that buyers are retaining control of the trend as the market prepares for its next directional move.

The recent breakout above the 185.80 resistance area is technically significant, as this zone had repeatedly capped upside attempts during the past several sessions. Price has now reclaimed and is attempting to establish acceptance above this level, turning former resistance into support. As long as EUR/JPY remains above this area, the broader bullish outlook remains intact.

The ascending trendline connecting higher lows from the May recovery continues to provide dynamic support and reinforces the constructive market structure. This trendline currently converges with horizontal support around the 185.40–185.50 region, creating an important technical floor for bulls. A sustained break below this confluence area would weaken the immediate bullish outlook and increase the risk of a deeper retracement toward the next support zone near 185.10.

Should sellers gain control beneath 185.10, downside pressure could accelerate toward the 184.40–184.50 support region, a key demand zone that previously acted as a launchpad for the latest rally. A decisive breakdown below this level would represent a significant deterioration in the short-term trend and could expose the 184.00 psychological handle, shifting the market from a bullish continuation phase into a broader corrective structure.

On the upside, bulls remain focused on the major resistance zone around 187.40–187.50, which represents the upper boundary highlighted on the chart and the next significant obstacle for the pair. A sustained breakout above this area would confirm a continuation of the prevailing uptrend and likely attract fresh momentum buying.

If buyers successfully clear 187.50, the next upside targets emerge near 188.00, followed by 188.50, levels not seen since the strongest phases of the Euro's rally against the Yen. Such a move would reinforce the broader bullish trend and potentially open the door for an extension toward fresh multi-year highs.

TRADE RECOMMENDATION

BUY EUR/JPY

ENTRY PRICE: 186.05

STOP LOSS: 185.35

TAKE PROFIT : 188.50

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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

2566

Win Rate

63.37%

P/L Ratio

0.74

Focus on

XAUUSD, EURUSD, GBPUSD

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