EUR/JPY Advances as Traders Price in Another ECB Rate Hike

Traders' Opinions

Summary:

EUR/JPY remained supported near 185.80 as expectations of further ECB rate hikes outweighed soft Eurozone economic data, while the Bank of Japan's gradual normalization approach continued to limit support for the Japanese Yen.

BUY EURJPY

EXP

PENDING

185.850

Entry Price

186.800

184.900

185.736 +0.038 +0.02%

Pips

PENDING

184.900

Exit Price

185.850

Entry Price

186.800

EUR/JPY traded near 185.80 on Monday, maintaining a firm tone as investors continued to price in further monetary tightening from the European Central Bank. The Euro found modest support despite mixed economic data from the Eurozone, with markets remaining focused on persistent inflation pressures and the likelihood of a 25-basis-point ECB rate hike at the June 11 policy meeting.

German Retail Sales declined by 0.3% in April, matching the previous month's fall but coming in slightly better than expectations for a 0.4% decline. While the figures highlighted ongoing weakness in consumer spending within Europe's largest economy, traders largely looked past the data as inflation remains the dominant driver of ECB policy expectations.

Additional data showed the Eurozone Manufacturing PMI eased to 51.6 in May from April's 52.2, though the reading remained above the 50 threshold that separates expansion from contraction. The report suggested manufacturing activity continues to grow despite losing some momentum.

Inflation remains a key concern for policymakers. Recent flash estimates showed price pressures accelerating in France, Italy, and Spain while remaining well above the ECB's 2% target across the region. This has reinforced expectations that the central bank will continue tightening policy in the coming months.

Meanwhile, the ECB's latest consumer survey revealed that households still expect elevated inflation over the next year, supporting the case for further rate increases and helping underpin demand for the Euro.

On the Japanese side, economic data was mixed. Japan's Manufacturing PMI remained strong at 54.5 in May, though corporate capital spending stagnated during the first quarter after robust growth at the end of 2025. Bank of Japan officials continue to signal a willingness to normalize policy gradually, but markets still expect the pace of tightening to remain slower than that of the ECB.

In my view, the policy divergence between the ECB and the BoJ remains the dominant driver for EUR/JPY. As long as Eurozone inflation stays elevated and the ECB maintains a hawkish stance, the Euro is likely to remain supported against the Yen, keeping the cross near its recent highs.

Technical Analysis

From a technical perspective, EUR/JPY remains firmly entrenched in a well-defined bullish structure, with the cross continuing to post higher highs and higher lows on the 2-hour chart. Price action has respected a rising trendline originating from the May 20 lows, highlighting persistent buying interest and reinforcing the broader uptrend that has dominated the latter half of May.

The pair is currently consolidating near 185.75 after an impressive rally from the 184.30 region. This pause appears to be a healthy consolidation rather than a reversal, as prices continue to hold above the ascending trendline and remain comfortably above former breakout resistance around 185.20, which has now turned into an important support zone.

The immediate focus for bulls remains the 185.75-185.80 resistance area, where price is currently trading. This region represents a significant supply zone and has capped upside momentum in recent sessions. A decisive breakout above this barrier would confirm continuation of the prevailing uptrend and likely attract fresh momentum buying.

Should buyers successfully clear 185.80, the next upside target emerges near the psychological 186.00 level. A sustained move above that handle would expose 186.50, while the broader bullish projection visible on the chart points toward the 186.80-187.00 region. Such a move would place EUR/JPY at fresh multi-year highs and reinforce the ongoing trend fueled by policy divergence between the European Central Bank and the Bank of Japan.

On the downside, the first layer of support is located near 185.20, which coincides with the recent breakout zone and ascending trendline support. This level is likely to attract dip-buying interest on any near-term pullback. A break below 185.20 would weaken immediate bullish momentum and expose the next support area near 184.30, where buyers repeatedly entered the market throughout May.

A more significant deterioration in market structure would only occur if EUR/JPY falls below 184.30 on a sustained basis. Such a move would invalidate the current sequence of higher lows and could trigger a deeper correction toward the 183.50 region. However, based on current price action, that scenario appears less likely while the pair remains above trendline support.

Momentum indicators suggest that the bullish trend remains intact despite recent consolidation. The Relative Strength Index (RSI) is likely holding near the 60-65 region, remaining firmly in positive territory without entering extreme overbought conditions. This suggests that buyers still retain control while leaving room for another leg higher before momentum becomes overstretched.

Meanwhile, the Moving Average Convergence Divergence (MACD) likely remains above the zero line, reflecting positive trend momentum. Although the indicator may be flattening slightly due to recent sideways trading, there are no clear signs of bearish divergence, supporting expectations for continued upside once consolidation is complete.

Overall, the technical outlook remains constructive. The combination of rising trendline support, higher highs, higher lows, and sustained trading above key breakout levels suggests that EUR/JPY continues to favor upside continuation, with any short-term pullbacks likely viewed as buying opportunities rather than trend reversals.

TRADE RECOMMENDATION

BUY EUR/JPY

ENTRY PRICE: 185.85

STOP LOSS: 184.90

TAKE PROFIT: 186.80

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Risk Disclosure

The risk of loss in trading financial instruments such as stocks, FX, commodities, futures, bonds, ETFs and crypto can be substantial. You may sustain a total loss of the funds that you deposit with your broker. Therefore, you should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

No decision to invest should be made without thoroughly conducting due diligence by yourself or consulting with your financial advisors. Our web content might not suit you since we don't know your financial conditions and investment needs. Our financial information might have latency or contain inaccuracy, so you should be fully responsible for any of your trading and investment decisions. The company will not be responsible for your capital loss.

Without getting permission from the website, you are not allowed to copy the website's graphics, texts, or trademarks. Intellectual property rights in the content or data incorporated into this website belong to its providers and exchange merchants.

Recent Searches

Top Searches

Markets

Analysis

User

24/7

Economic Calendar

Education

Data

EUR/JPY Advances as Traders Price in Another ECB Rate Hike

Technical Analysis

Risk Disclosure