The Euro (EUR) held modest gains against the Japanese Yen (JPY) on Thursday, with EUR/JPY last seen around 172.65, up 0.10% on the day. The pair touched a session high of 173.06 after the European Central Bank (ECB) kept policy rates unchanged but struck a hawkish tone, before retreating as Bank of Japan (BoJ) tightening speculation limited upside momentum.
ECB keeps rates steady, Lagarde signals hawkish consensus
The ECB left its Deposit Rate unchanged at 2%, in line with expectations, while reiterating its meeting-by-meeting and data-dependent approach. The Governing Council emphasized it is not on a pre-committed path, leaving room for future adjustments.
President Christine Lagarde stressed that the disinflationary process is “over,” adding that monetary policy is “in a good place” and that Thursday’s decision was unanimous. She also highlighted easing trade uncertainty but warned that growth risks remain tilted to the downside. The hawkish stance initially boosted the Euro, lifting EUR/JPY toward 173.00.
Yen pressured by political turmoil, supported by BoJ speculation
The Japanese Yen weakened following Prime Minister Shigeru Ishiba’s resignation, which added to political uncertainty. However, EUR/JPY gains were capped after reports suggested the BoJ could raise rates later this year.
BoJ Governor Kazuo Ueda has recently signaled a readiness to tighten policy if growth and inflation evolve in line with projections. Market pricing reflects a 62% probability that the BoJ will keep rates at 0.50%, with a 38% chance of a 25-basis-point hike to 0.75%, according to the Prime Market Terminal tool.
EUR/JPY technical outlook
EUR/JPY remains close to weekly lows after bouncing off the 20-day Simple Moving Average (SMA) at 172.29. The pair has struggled to sustain a break above 173.00, suggesting short-term resistance remains firm.
If sellers push the pair below 172.00, downside targets include the August 28 low at 171.12, followed by the 171.00 handle. On the upside, reclaiming 173.00 would pave the way for a test of the September 8 high at 173.91.
The Relative Strength Index (RSI) remains in bullish territory, though near-term signals point to potential retracement before buyers can mount another challenge higher.
