Downside Opportunities Emerge as EURJPY Faces Rejection at Descending Trendline

Forex

Economic

Summary:

Additionally, the RSI displays a slight divergence compared to the previous point where price tested the descending trendline, adding weight to the bearish thesis.

SELL EURJPY

EXP

PENDING

185.700

Entry Price

183.150

187.000

184.891 -0.108 -0.06%

Pips

PENDING

183.150

Exit Price

185.700

Entry Price

187.000

The Euro found some backing in comments made by European Central Bank President Christine Lagarde during the ECB Forum in Sintra. The official stated that risks to the economy are currently more balanced than they were a few weeks ago and rejected the idea that the Eurozone is facing a stagflation scenario. Likewise, she reiterated that the institution stands ready to act if necessary to ensure that inflation converges sustainably toward its target.

However, the latest consumer price figures reinforced the perception that inflationary pressures continue to moderate across the bloc, reducing the urgency for further monetary adjustments by the ECB. Preliminary data showed that the Eurozone Harmonized Index of Consumer Prices (HICP) slowed to 2.8% year-on-year in June, down from the 3.2% recorded in May and coming in below the market expectation of 3.0%. On a monthly basis, the indicator pulled back by 0.1%, following the 0.1% advance observed the previous month.

Moderation was also evident in core inflation, a measure closely watched by the ECB as it excludes more volatile components such as food and energy. Core HICP advanced 2.4% year-on-year, down from the previously recorded 2.6% and below consensus forecasts. In the monthly comparison, the indicator increased by 0.2%, slowing down from the 0.3% observed in May.

The decline in headline inflation was mainly driven by the drop in energy prices, while the reduction in core inflation suggests that domestic price pressures are also beginning to lose momentum. This scenario has led markets to moderate expectations of further rate hikes by the ECB, limiting the single currency's upside potential.

Meanwhile, in Asia, Japanese authorities reinforced their warnings regarding currency volatility. Japan's Finance Minister, Satsuki Katayama, and U.S. Treasury Secretary, Scott Bessent, agreed to coordinate actions on foreign exchange matters if market conditions require it. Along the same lines, Japanese Chief Cabinet Secretary Minoru Kihara reiterated that the Government stands ready to act against excessive or disorderly movements in the currency market.

On the other hand, the Summary of Opinions from the Bank of Japan's (BoJ) June meeting revealed growing concern among policymakers regarding the rebound in inflationary pressures. Some members highlighted the need to accelerate the pace of rate hikes with the goal of moving borrowing costs closer to levels considered neutral for the economy.

This view was supported by Tokyo's latest inflation report, which showed an acceleration in consumer prices and strengthened expectations that the Bank of Japan will continue moving toward a less accommodative monetary policy over the coming months. The combination of more persistent inflation and an economy maintaining a degree of momentum continues to back the argument for a gradual normalization of interest rates in Japan. Downside Opportunities Emerge as EURJPY Faces Rejection at Descending Trendline_1

Downside Opportunities Emerge as EURJPY Faces Rejection at Descending Trendline_1

Technical Analysis

EURJPY is locked in a downtrend that began on April 16 when it hit the 187.95 price level. Since then, it has failed to create higher highs, establishing the lower highs characteristic of downward trends. Recently, the price encountered resistance as it approached the descending trendline; during the previous session, it reacted downward after briefly reaching the 185.84 level. With the risks of a JPY intervention present, we could see a downside impulse targeting 183.16, a zone where the price found local support during the last yen intervention. Meanwhile, the 100 and 200-period moving averages sit at 184.94 and 185.06, respectively, and a decisive close below this zone could accelerate the price lower.

Looking at the oscillators, the RSI is currently hovering at the 70 level, briefly touching overbought territory, which could attract short-sellers to establish positions. Additionally, the RSI displays a slight divergence compared to the previous point where price tested the descending trendline, adding weight to the bearish thesis. Meanwhile, the MACD shows a histogram that has just crossed downward; if it begins to gain depth, the decline could materialize. Although the signal lines sit slightly above the neutral zone and a downside cross would add weight to the bearish move, the ideal area for positioning remains near the descending trendline, as the price would likely experience high volatility before moving lower in the event of an intervention.

Trading Recommendations

Trading direction: Sell

Entry price: 185.70

Target price: 183.15

Stop loss: 187.00

Validity: Jul 10, 2026 15:00:00

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Downside Opportunities Emerge as EURJPY Faces Rejection at Descending Trendline

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