EUR/JPY Steadies at 180.25 as BoJ Rate & Intervention Weigh

Key Moments

EUR/JPY Holds Ground Amid Thin Liquidity and Intervention Jitters

EUR/JPY is trading flat around 180.25 in early European hours on Monday, with price action muted as Japanese markets are closed for a three-day holiday. The absence of domestic participation is contributing to subdued liquidity conditions.

Market participants remain vigilant over the possibility of currency intervention by Japanese authorities as they attempt to stabilize what has been a volatile move in the Yen. Reports that officials are actively monitoring FX conditions are keeping traders cautious about adding aggressive directional exposure.

BoJ’s Dovish Hike Leaves Yen Under Pressure

The Bank of Japan recently increased its policy rate by 25 basis points to 1.25%, marking the highest level since 1995 and aligning with market expectations. However, the absence of a clearly hawkish policy message has dampened sentiment toward the Japanese Yen, supporting the Euro on the crosses.

Interest-rate swaps show less than a 20% probability of another move at the next policy gathering at the end of October, while markets are assigning approximately 90% odds to a further hike at the December meeting.

According to a report in the Nikkei newspaper, Japanese officials have been conducting rate checks. In practice, this involves authorities requesting currency quotations from banks to assess market conditions, a step that traders commonly interpret as a potential precursor to direct intervention in the foreign exchange market.

ECB’s Lagarde Stresses Data-Dependent Path

On the Euro side, policymakers continue to emphasize flexibility. European Central Bank President Christine Lagarde stated that any additional rate increase by the ECB “will depend on the future.” She noted that the Governing Council will decide “meeting by meeting” whether it is appropriate to hold, raise, or cut interest rates, while emphasizing that cutting rates “is very unlikely at the moment.”

DBS: Yen Vulnerable if BoJ Fails to Meet Hawkish Expectations

Strategists at DBS highlight that markets are already focused on the BoJ’s policy trajectory beyond the immediate horizon, observing that investors have “priced in a second hike in Dec and a third hike by April next year,” which could leave the Yen exposed if policymakers disappoint.

They warn that “policy guidance that is not quite as hawkish could see a resumption of JPY selling pressures,” given the substantial tightening already embedded in market pricing. At the same time, DBS points out that the BoJ is “hiking from a position of deeply negative real rates,” and with “inflation pressures in the pipeline due to energy shocks,” it would be “quite a surprise if Governor Ueda does not reinforce a vigilant stance and signal the possibility of more near-term hikes.”

EUR/JPY Technical Picture: Bearish Bias Below 100-Day SMA

From a technical perspective, EUR/JPY continues to display a bearish short-term profile on the daily chart, with spot trading below both the middle Bollinger band and the 100-day Simple Moving Average (SMA). This setup indicates that rebounds are, for now, more consistent with corrective moves within a broader topping process.

The Relative Strength Index (RSI) sits near 41.7, under the neutral 50 mark, underscoring that bullish momentum remains modest despite the pair’s recent stabilization away from its lows.

On the topside, the first notable resistance is located near the middle Bollinger band at 181.55. Above that, the 100-day SMA around 184.18 represents a more robust barrier, with the upper Bollinger band near 187.45 coming into view should buyers manage to extend the recovery.

On the downside, key support aligns with the lower Bollinger band around 175.60. A clear drop below this region would point to renewed downside momentum and the potential for the prevailing bearish phase to deepen.