Bullish Correction Could Develop from Lower Channel Support

Central Bank

Economic

Summary:

Despite the subsequent recovery in price, the RSI has not yet rebounded aggressively, suggesting that bullish momentum still has room to develop if buyers continue to regain control.

BUY EURJPY

EXP

TRADING

179.258

Entry Price

183.180

176.700

179.300 -0.002 0.00%

0.0

Pips

Flat

176.700

Exit Price

179.258

Entry Price

183.180

According to a recent survey, the Bank of Japan (BoJ) is expected to raise interest rates to 1.25% at its September monetary policy meeting and subsequently increase them to 1.75% during the second quarter of 2027, earlier than previously anticipated by market participants.

BoJ board member Kazuyuki Masu stated on Thursday that the central bank could eventually be forced to raise interest rates more rapidly if inflation accelerates, given the highly accommodative financial conditions that continue to prevail in Japan. His comments reinforced expectations that policymakers remain prepared to react should inflationary pressures strengthen beyond current projections.

Last week, fellow board member Hajime Takata also suggested that the central bank could adopt a more aggressive policy stance than markets currently expect. Takata noted that a 25-basis-point increase is “not necessarily predetermined” and indicated that consecutive rate hikes could also be considered if economic and inflation conditions warrant additional tightening.

The European Central Bank (ECB) continued its tightening cycle by raising its three key interest rates by 25 basis points, marking its second increase of the year and bringing the deposit facility rate to 2.50%. Policymakers justified the decision by highlighting the ongoing conflict in the Middle East, which continues to generate inflationary pressures and increases the risk that inflation could remain above the ECB’s 2% target for a prolonged period.

The ECB’s latest economic projections reflect these concerns. The central bank expects headline inflation to average 3.0% in 2026, moderate to 2.5% in 2027, and gradually decline toward 2.1% in 2028. Although inflation is still projected to move lower over the medium term, policymakers acknowledged that the disinflation process is advancing more slowly than previously expected.

During the press conference following the policy meeting, ECB President Christine Lagarde stated that the Eurozone economy continues to show resilience, while most underlying inflation indicators remain relatively stable. Nevertheless, she warned that short-term inflation expectations remain elevated and that higher energy prices are likely to continue passing through into food and goods prices in the coming months.

Lagarde also reiterated that the ECB expects inflation to return to target toward the end of 2027, emphasizing that longer-term inflation expectations remain anchored near 2%. Regarding future monetary policy decisions, she refrained from providing specific forward guidance, noting that the Governing Council did not discuss a predefined rate path and that future actions will remain dependent on incoming economic data. Bullish Correction Could Develop from Lower Channel Support_1

Bullish Correction Could Develop from Lower Channel Support_1

Technical Analysis

EURJPY has declined sharply amid interventions that have strengthened the Japanese yen, pushing the pair down to a local low of 177.86. As shown on the chart, price action continues to develop within a descending channel, with the most recent lower wicks aligning with the lower boundary of that structure, where buyers have already managed to generate an initial reaction to the upside.

If this support area continues to hold, the pair could begin a bullish corrective move toward the 183.18 area, which corresponds to a local support zone and is also positioned near the midpoint between the 0.50 and 0.618 Fibonacci retracement levels. Slightly above this region, the 100-period and 200-period moving averages are located at 184.20 and 184.60 respectively, indicating that the average price remains concentrated around this area and reinforcing its technical relevance as a potential corrective target.

Looking at momentum indicators, the Relative Strength Index (RSI) recently fell to 17, entering deeply oversold territory. Despite the subsequent recovery in price, the RSI has not yet rebounded aggressively, suggesting that bullish momentum still has room to develop if buyers continue to regain control. Meanwhile, the MACD continues to display a bearish histogram, although it is rapidly losing depth, indicating that downside momentum is fading and that sellers may be losing control of the market.

At the same time, the MACD signal lines remain well within bearish territory. As long as they fail to build a stronger recovery toward the neutral zone, the current upward movement continues to be viewed primarily as a bullish correction within a broader bearish trend rather than the beginning of a complete trend reversal.

Trading Recommendations

Trading direction: Buy

Entry price: 179.34

Target price: 183.18

Stop loss: 176.70

Validity: Sep 23, 2026 15:00:00

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Bullish Correction Could Develop from Lower Channel Support

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