EUR/JPY Bears Eye Range Breakdown as ECB Meeting Approaches

Traders' Opinions

Summary:

EUR/JPY struggles to extend its recovery from 175.40 as traders await ECB and BoJ policy decisions. The pair remains range-bound, with a downside breakout needed to confirm further bearish momentum.

SELL EURJPY

EXP

TRADING

176.100

Entry Price

173.600

177.500

176.179 -0.114 -0.06%

0.0

Pips

Flat

173.600

Exit Price

176.100

Entry Price

177.500

The EUR/JPY cross struggled to extend its latest recovery on Thursday, attracting renewed selling after rebounding from the weekly low near 175.40. Despite the pullback, the pair remains confined within a narrow trading range established over the past week, as investors hesitate to take strong directional positions ahead of key central bank decisions in Europe and Japan.

The immediate focus is on the European Central Bank’s policy announcement, with interest rates widely expected to remain unchanged. However, markets will be looking for indications that policymakers are still considering a 25-basis-point increase in December. ECB President Christine Lagarde’s press conference could prove particularly important, although expectations for a decisive policy signal remain limited.

Political and fiscal uncertainty in France may encourage the ECB to preserve its flexibility rather than commit to a specific rate path. This uncertainty could limit enthusiasm for the Euro, particularly as renewed buying interest in the US Dollar adds to the pressure on the common currency. Without a clear hawkish surprise from the ECB, EUR/JPY may struggle to establish sustained upward momentum.

The Japanese Yen, meanwhile, continues to face headwinds from the substantial interest rate differential between Japan and other major economies. This gap supports carry trades, in which investors borrow in lower-yielding currencies to pursue higher returns elsewhere. Japan’s record-high debt-to-GDP ratio also remains a source of fiscal concern, discouraging investors from making aggressive bullish bets on the Yen.

Nevertheless, the upcoming Bank of Japan decision could complicate the outlook for the cross. Markets are not anticipating an immediate rate increase, but persistent inflation is expected to keep the central bank’s policy stance relatively hawkish. The Tokyo Consumer Price Index, due ahead of Friday’s BoJ announcement, could offer an additional indication of whether price pressures are strong enough to influence the policy outlook.

In my assessment, EUR/JPY remains vulnerable to renewed selling if the ECB fails to deliver a sufficiently hawkish message while the BoJ reinforces expectations of eventual tightening. However, the cross’s established trading range makes confirmation important. A sustained break below the recent range would strengthen the bearish case, while a decisive upside move would suggest that Yen weakness continues to outweigh concerns surrounding the Euro.

Technical Analysis

EUR/JPY remains bearish on the H4 chart, trading around 176.13 after breaking below the consolidation area that had supported price around 176.60–176.80. The broader structure continues to show lower highs and lower lows, indicating that sellers retain control despite intermittent recovery attempts. The latest decline pushed the pair beneath the previous support zone, and price is now struggling to regain that area, increasing the possibility that former support will act as resistance.

The immediate resistance lies around 176.50–176.80, where the broken support zone could cap any short-term rebound. Price may retrace toward this area before sellers attempt to resume the decline. A stronger recovery above this zone would weaken the immediate bearish setup, while a move toward 177.50–178.20 would be needed to challenge a more significant resistance region and signal a broader improvement in momentum.

On the downside, the recent low around 174.90–175.00 is the first important support area to watch. A decisive break below it would strengthen the bearish continuation scenario, potentially exposing 173.60 before the deeper target zone around 170.30–170.90 shown on the chart. With price consolidating beneath broken support, the technical bias favors selling rallies rather than chasing the decline, although confirmation from a fresh bearish move remains important.

TRADE RECOMMENDATION

SELL EUR/JPY

ENTRY PRICE: 176.10

STOP LOSS: 177.50

TAKE PROFIT: 173.60

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