EUR/JPY Holds Firm as Strong Eurozone GDP Offsets BoJ Caution

Traders' Opinions

Summary:

EUR/JPY steadied after stronger-than-expected German and Eurozone GDP data reinforced expectations that the ECB could keep tightening policy.

BUY EURJPY

Close Time

CLOSED

186.900

Entry Price

188.200

185.500

183.454 -3.935 -2.10%

140.0

Pips

Loss

185.500

185.487

Exit Price

186.900

Entry Price

188.200

The Euro erased early losses against the Japanese Yen on Thursday as stronger-than-expected economic data from Germany and the broader Eurozone helped stabilize sentiment. EUR/JPY traded near 187.35, with investors balancing encouraging European growth figures against caution ahead of the Bank of Japan's policy meeting.

Germany's preliminary second-quarter GDP expanded 0.2% quarter-on-quarter, beating forecasts for a 0.1% increase, while annual growth accelerated to 0.9%, comfortably above market expectations. Across the Eurozone, economic activity also surprised to the upside, with GDP rebounding 0.4% after contracting in the previous quarter, reinforcing the view that the region's economy remains more resilient than previously feared.

Inflation data from Germany's states also pointed to persistent price pressures, strengthening expectations that the European Central Bank may have further room to raise interest rates later this year. In my view, resilient growth combined with sticky inflation continues to provide a supportive backdrop for the Euro, even as investors remain cautious about the global outlook.

Attention now turns to Friday's Bank of Japan policy announcement and Tokyo CPI data. Markets overwhelmingly expect the BoJ to leave interest rates unchanged, meaning the focus will be on Governor Kazuo Ueda's guidance and whether policymakers signal confidence in further tightening. Any hawkish shift could lend fresh support to the Yen, while a cautious tone may allow EUR/JPY to maintain its broader upward bias.

Technical Analysis

EUR/JPY has pulled back sharply after failing to sustain its breakout above the 187.40 resistance zone, but the broader technical picture remains constructive. The decline has found support around the 50% Fibonacci retracement near 186.76, which aligns closely with a previous resistance area that is now being retested as support. Holding above this region keeps the recent breakout structure intact.

The ascending trendline from the July lows continues to underpin the bullish outlook, suggesting that the latest decline may be a healthy correction rather than the beginning of a broader reversal. A successful defense of the 186.60–186.75 demand zone could encourage buyers to re-enter the market and target a move back toward the recent swing high at 187.40. A decisive break above that barrier would expose the 188.20–188.30 resistance region.

However, failure to hold above the confluence of the 50% Fibonacci retracement and the rising trendline would weaken the near-term recovery. Such a move could open the door for a deeper retracement toward the 78.6% Fibonacci level near 186.43, with the July support around 186.10 becoming the next key downside level.

Momentum indicators continue to favor a recovery despite the intraday pullback. The correction appears to be losing steam after an impulsive rally, while the overall sequence of higher highs and higher lows remains intact. As long as price continues to trade above the rising trendline, buyers are likely to retain the upper hand.

TRADE RECOMMENDATION

BUY EUR/JPY

ENTRY PRICE: 186.90

STOP LOSS: 185.50

TAKE PROFIT: 188.20

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