EUR/JPY Technical Analysis: Bullish Momentum Amid ECB Policy Outlook

Market Overview and ECB Sentiment

The EUR/JPY pair has recorded gains for four consecutive trading sessions, positioning itself for a positive weekly close. While the euro has not fully leveraged recent hawkish guidance, market participants are weighing reports that European Central Bank (ECB) policymakers remain open to potential rate hikes in September.

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ECB President Christine Lagarde noted that inflation risks are skewed to the upside, while economic growth faces downside pressures. The central bank remains committed to its 2% inflation target, maintaining a data-dependent stance and refraining from providing specific forward guidance regarding future interest rate adjustments.

Currency Drivers and Economic Outlook

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The euro maintains a supportive tailwind from the ECB’s hawkish monetary policy, which stands in contrast to the Bank of Japan’s (BoJ) cautious approach. Although the Japanese yen continues to weaken, the move remains measured due to lingering market caution regarding potential intervention by the BoJ to stabilize the currency.

Market participants are now focusing on preliminary PMI data for Germany, France, and the broader euro area. Forecasts suggest a slight dip in the Manufacturing PMI to 51.3, while the Services PMI is projected to improve to 49.8, though it remains within contraction territory.

Technical Analysis

The daily chart for EUR/JPY displays a persistent bullish bias, bolstered by a rising Relative Strength Index (RSI). The recent breakout above the 186.35 resistance level suggests a potential shift from a sideways range toward an established upward trend.

To sustain this bullish momentum, the pair must break above the April 30 high of 187.60. A successful move above this level would allow for a test of the 187.95 annual high, with further psychological resistance expected at 188.00 and 190.00.

Conversely, a shift in market structure would require sellers to break below the support level at 186.00. A failure to hold this level could expose the pair to a test of the 100-day moving average.

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