EUR/JPY Holds Ground as Yen Weakens on Soft Japan Data, ECB Comments Lend Euro Support

Summary:

EUR/JPY steadied near 173.70 in Asian trade Thursday as weak Japanese machinery orders weighed on the yen and ECB officials signaled no rush to cut rates further.

BUY EURJPY

Close Time

CLOSED

174.300

Entry Price

176.000

173.000

183.491 -1.126 -0.61%

22.3

Pips

Profit

173.000

174.523

Exit Price

174.300

Entry Price

176.000

The euro-yen cross steadied in Asian trading on Thursday, hovering near 173.70, as traders weighed a mix of weak Japanese data, dovish signals from the Federal Reserve, and an increasingly steady tone from the European Central Bank (ECB). The pair’s resilience comes after a mild pullback in the previous session, with market participants now assessing whether momentum favors another leg higher.

At the center of the yen’s weakness is Japan’s disappointing Core Machinery Orders data. The Cabinet Office reported that orders fell 4.6% month-over-month in July, a sharper contraction than the market’s expected 1.7% decline. On an annual basis, orders grew 4.9%, missing forecasts for a 5.4% increase. While machinery orders are notoriously volatile, the sharp monthly drop reinforced concerns that business investment is losing steam—casting doubt on the strength of Japan’s fragile recovery.

The softer data has raised the likelihood that the Bank of Japan (BoJ) will leave interest rates unchanged at its upcoming policy meeting on Friday. Policymakers are walking a fine line: on one hand, inflationary pressures remain subdued, giving them room to remain accommodative; on the other, speculation persists that the BoJ could deliver a modest 25-basis-point rate hike in October should the broader economy demonstrate more resilience.

This policy uncertainty is compounded by the latest move from the U.S. Federal Reserve. On Wednesday, the Fed cut interest rates by 25 basis points and signaled that another 50 bps of easing could be delivered before year-end. Such aggressive forward guidance puts the Fed on a dramatically different path from the BoJ, which is still viewed by many as edging toward gradual normalization. Yet, counterintuitively, the Fed’s dovish stance could lend some support to the yen, given its traditional role as a safe haven when U.S. yields retreat. For now, however, the yen continues to trade heavily, with investors reluctant to pile in until the BoJ clarifies its direction.

Meanwhile, the euro is finding its own sources of support. Recent inflation data has bolstered the view that the ECB is done cutting rates for the foreseeable future. Policymakers including Martins Kazaks, Gediminas Simkus, and Vice President Luis de Guindos all emphasized this week that current levels are “appropriate,” suggesting a pause in monetary easing unless inflation dynamics shift meaningfully. ECB President Christine Lagarde is scheduled to speak later Thursday, and traders will parse her remarks for further confirmation of this stance.

Taken together, the divergence between a hesitant BoJ and a steadying ECB creates fertile ground for EUR/JPY upside. From a fundamental standpoint, the euro appears anchored by an improving inflation outlook, while the yen is weighed down by weak domestic data and policy ambiguity. Still, the Fed’s easing trajectory adds a wrinkle: if global yields continue to fall, the yen may eventually attract demand from carry-trade unwinds.

Technical Analysis

From a chart perspective, EUR/JPY has re-established a bullish bias after closing above the 174.00 resistance level in recent sessions. The pair remains comfortably within its broader ascending channel, and momentum indicators suggest room for further gains. The stochastic oscillator is stabilizing in overbought territory, often a sign of sustained positive momentum rather than immediate exhaustion.

As long as the cross holds above 174.00, the path of least resistance appears higher, with immediate resistance around 174.50. A successful break above this zone could pave the way for a move toward 175.00, with the next significant target near 176.00. Conversely, a drop below 173.00 would undermine the bullish setup, potentially exposing the cross to a deeper correction.

TRADE RECOMMENDATION

BUY EURJPY

ENTRY PRICE: 174.30

STOP LOSS: 173.00

TAKE PROFIT: 176.00

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EUR/JPY Holds Ground as Yen Weakens on Soft Japan Data, ECB Comments Lend Euro Support

TRADE RECOMMENDATION

Risk Disclosure