EUR/JPY Price Forecast: Softens to near 184.50, mildly bearish bias persists under 100-day SMA

The EUR/JPY cross trades in negative territory around 184.60 during the early European trading hours on Wednesday. The Japanese Yen (JPY) edges higher against the Euro (EUR) amid hawkish signals from the Bank of Japan (BoJ). Japan’s National Consumer Price Index (CPI) inflation report will be the highlight later on Friday. 

Growing speculation that the Bank of Japan may raise interest rates in the coming months provides some support to the JPY. Reuters in a report Friday said the Japanese central bank is considering a rate hike as soon as September. Overnight index swaps are pricing in about an 80% odds of a move by that month.

On the other hand, mounting fiscal worries in Japan could exert some selling pressure on the JPY. 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 yet to identify an alternative revenue source and the measure is viewed as an ineffective way to fight inflation.

Japan political pressures bolster support for higher rates to steady the Yen

Strategists at DBS highlight a notable shift in Japan’s policy backdrop, observing that Prime Minister Sanae Takaichi has become “more supportive of raising interest rates to stabilize the JPY amid lower approval ratings and rising cost-of-living pressures.” They argue that this evolving political stance is adding to the case for a less accommodative policy mix, as authorities increasingly frame higher rates as a tool to shore up the Yen and address mounting domestic concerns.

Technical Analysis: EUR/JPY keeps a mildly bearish vibe in the near term

In the daily chart, EUR/JPY maintains a mildly bearish near-term bias as it holds below the 100-day simple moving average (SMA). Price remains confined within the Bollinger Bands, sitting above the middle band support but well under the upper band resistance, which hints at capped upside while the Relative Strength Index (14) at 52.71 stays in neutral territory.

On the topside, initial resistance appears at the 100-day SMA near 185.10. The next upside barrier is located at the June 17 high of 186.32, en route to the upper Bollinger Band around 187.65. 

On the downside, immediate support is seen at the Bollinger middle band at 184.10, ahead of a deeper cushion near the August 10 low of 182.70. The next contention level is seen at the lower band around 180.50, where a more pronounced corrective phase could find demand.