EUR/JPY Holds Above Key Support As BOJ Hikes Loom

Key Moments

EUR/JPY trades with modest losses around 185.60 in Monday’s early European session, while remaining supported above its 100-day simple moving average.
Japan’s July core CPI accelerated to 1.8% year-on-year from 1.6%, reinforcing expectations for another Bank of Japan rate hike.
Societe Generale maintains its call for a September BoJ hike and a gradual normalization path, aligning with market pricing of a roughly 82% probability of a move.

Cross Softens as Yen Strengthens on Inflation Data

EUR/JPY is posting slight declines near 185.60 in early European trading on Monday. Despite the pullback, the pair remains comfortably above its 100-day simple moving average (SMA), with momentum indicators still pointing to a constructive tone.

The Japanese Yen is gaining ground against the Euro after fresh inflation data indicated an acceleration in core consumer prices in July, reinforcing expectations that the Bank of Japan (BoJ) could move ahead with another interest rate increase.

Japan Inflation Data Backs BoJ Tightening Expectations

Figures released by Japan’s Statistics Bureau on Friday showed that headline National Consumer Price Index (CPI) inflation rose to 1.9% year-on-year in July, up from 1.6% in June, marking the highest reading so far this year. Core CPI – which includes energy-related components but strips out volatile fresh food prices – increased 1.8% year-on-year in July, compared with 1.6% previously.

These results are seen as strengthening the case for further policy tightening by the BoJ. Market pricing as of late Friday reflected an estimated 82% probability of a rate hike in September, up sharply from around 23% just before the central bank’s July policy decision, according to Bloomberg.

Focus Shifts to BoJ Communication

Market participants are now looking ahead to remarks from BoJ Deputy Governor Ryozo Himino on Thursday, which could provide additional clues on the likely pace of future rate increases. Any signal leaning toward a more hawkish stance could support the Yen further and weigh on EUR/JPY.

“Himino may signal the BOJ is moving closer to another interest rate hike,” said Commonwealth Bank of Australia strategist Joe Capurso.

Societe Generale: Normalization Path Remains on Track

Analysts at Societe Generale view the latest price data as consistent with the central bank’s current course, rather than a trigger for an accelerated tightening cycle.

They argue that the new inflation figures “should not push the BoJ to move faster than currently priced,” but instead “clearly support the current normalization path and our call for a September hike.” In their report, titled “On Our Minds: BoJ call change: quarterly rate hikes until next June,” they emphasize that the data supports the existing strategy of gradual normalization.

Technical Overview: Constructive Bias Intact Above 100-Day SMA

From a technical perspective on the daily chart, EUR/JPY maintains a positive near-term bias. The pair is trading above both the 100-day SMA and the middle line of the Bollinger Bands, signaling underlying support.

The price is edging toward the upper Bollinger Band, with the Relative Strength Index (RSI) at 58.18, remaining in bullish territory without indicating overbought conditions. This setup suggests that upward momentum remains favorable while leaving room for additional gains.

Technical Level	Description	Approximate Level
Initial Support	100-day SMA	185.15
Secondary Support	Bollinger middle band	184.00
Deeper Support	Bollinger lower band	180.60
First Resistance	Bollinger upper band	187.35

On the downside, the first notable technical floor is at the 100-day SMA around 185.15. Below that, additional support is seen at the Bollinger middle band near 184.00, followed by the lower band at 180.60.

On the upside, the upper Bollinger Band near 187.35 is the next key resistance. A sustained move above this area would signal scope for an extension of the broader uptrend.