The EUR/JPY cross trades with mild losses near 185.60 during the early European session on Monday. The Japanese Yen (JPY) edges higher against the Euro (EUR) after data showed core Consumer Price Index (CPI) inflation accelerated in July, bolstering the case for a rate hike by the Bank of Japan (BoJ).
Japan’s headline National Consumer Price Index (CPI) inflation climbed to 1.9% YoY in July from 1.6% in June, hitting its highest level so far this year, the Statistics Bureau revealed on Friday. Meanwhile, the core CPI, which includes energy-related items but excludes volatile fresh food prices, rose 1.8% YoY in July, versus 1.6% prior. This report bolsters the case for another interest rate hike by the Japanese central bank.
As of late Friday, markets have priced in a roughly 82% chance of a September rate increase, more than tripling from about 23% immediately before the BoJ’s July policy meeting, according to Bloomberg.
Traders await the speech by BoJ Deputy Governor Ryozo Himino on Thursday as it might offer some hint about the pace of rate hikes. Any hawkish remarks from BoJ policymakers could underpin the JPY and act as a headwind for the cross.
“Himino may signal the BOJ is moving closer to another interest rate hike,” said Commonwealth Bank of Australia strategist Joe Capurso.
BoJ normalization path seen intact as SocGen sticks to September hike call
Analysts at Societe Generale argue that the latest inflation data in Japan “should not push the BoJ to move faster than currently priced,” but instead “clearly support the current normalization path and our call for a September hike.” In their note, titled “On Our Minds: BoJ call change: quarterly rate hikes until next June,” they reiterate that the figures back the Bank of Japan’s existing trajectory rather than forcing a more aggressive tightening pace.
Technical Analysis: EUR/JPY maintains a constructive bias above the 100-day SMA
In the daily chart, EUR/JPY maintains a bullish near-term bias as price holds above the 100-day simple moving average (SMA) and the Bollinger middle band. The pair is advancing toward the Bollinger upper band, while the Relative Strength Index (RSI) at 58.18 remains in positive territory without yet signaling overbought conditions, which suggests upward momentum is still constructive.
On the downside, initial support is located at the 100-day SMA around 185.15, with a deeper cushion offered by the Bollinger middle band near 184.00 and the lower band at 180.60. On the topside, the Bollinger upper band at 187.35 stands as the next significant resistance, and a sustained break above this barrier would open the path for a continuation of the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
(This story was corrected on August 24 at 05:10 GMT to say, in the first bullet point, that EUR/JPY posts modest losses around 185.60 in Monday’s early European session, not Asian session.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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