EUR/JPY Price Forecast: Declines below 178.00, bearish outlook prevails under the 100-day SMA
- EUR/JPY softens to near 177.90 in Thursday’s early European session.
- The bearish outlook remains intact below the 100-day SMA; further consolidation cannot be ruled out with neutral RSI.
- The initial support level is seen at 176.90; the first upside barrier emerges at 178.45.
The EUR/JPY cross trades in negative territory around 177.90 during the early European session on Thursday. The Japanese Yen (JPY) strengthens against the Euro (EUR) after minutes of the Bank of Japan's (BoJ) September meeting reinforced expectations for further interest rate hikes.
According to the minutes of the September meeting released on Thursday, most of the BoJ policymakers agreed that further interest rate increases would be appropriate as underlying inflation approached the central bank's 2% target.
One board member indicated that there may be room to accelerate interest rate increases as the central bank assessed the effects of Middle East developments, growing demand linked to Artificial Intelligence (AI), and Foreign Exchange (FX) movements.
On the other hand, a hawkish stance from the European Central Bank (ECB) might help limit the EUR’s losses. ECB Governing Council member Joachim Nagel said on Tuesday that the central bank will probably increase borrowing costs next month due to the worsening outlook for inflation. Economists expect a final move in rates next month, though markets see tightening continuing beyond that, into 2027.
Eurozone stagflation risks build as ECB faces stronger inflation and weaker growth
Analysts at Standard Chartered highlight that the latest Eurostat release showed euro area headline inflation “rising to 4.0% y/y in October, above our expectation of 3.8%,” which “signals upside risks to the European Central Bank’s (ECB’s) September projection of 3.6% average inflation in Q4.” On the activity side, they note that, “stripping Ireland out, euro area GDP growth was a more modest 0.2%, and, crucially, growth momentum has been falling steadily since Q4-2025.”
Standard Chartered argues that this “combination of weakening growth momentum (using euro area ex Ireland data) and still-rising inflation creates a growing policy dilemma for the ECB,” with “inflation dynamics (and the risk of second-round effects)” likely to dominate for now and “underpinning our expectation of another 25bps hike at the December meeting.” While they stress that “stagflation is not our base case; we expect growth to remain positive and inflation to begin falling early next year,” the bank cautions that “the direction of travel is that way, and the forces that could produce stagflation in coming quarters are apparent: higher energy prices that are squeezing real income and weighing on corporate profit margins; ECB monetary tightening operating with lagged effects on household and corporate borrowing costs; and tighter financial conditions weighing on broader activity.”
Nagel flags likely December hike as inflation risks intensify
ECB’s Nagel delivered a more hawkish message than usual, with an FXS Speechtracker score of 8.2 versus a historic 7.0, as a December rate hike is described as “very likely to be necessary.” The emphasis on inflationary pressures being higher than expected and close to an adverse scenario underlines a clear tightening bias and reinforces support for the Euro on rate expectations.
Nagel’s insistence that an energy price spike must not trigger broad-based inflation signals readiness to act again, even as fiscal issues in France are framed as outside the remit of monetary policy. The combination of strong inflation warnings and confidence that budget issues will be managed keeps the focus on price stability and supports a hawkish interpretation for Euro traders.
Technical Analysis: EUR/JPY keeps a bearish vibe under the 100-day SMA
In the daily chart, EUR/JPY remains in a corrective phase, holding below the 100-day Simple Moving Average (SMA), which keeps the broader bias bearish despite the recent rebound from the lower Bollinger Band. Price has reclaimed the 20-day Bollinger SMA support, suggesting some near-term stabilization, while the Relative Strength Index (RSI) at 53.4 has shifted into neutral-to-positive territory, hinting that downside momentum has faded but not yet reversed the broader cap imposed by the higher averages.
On the downside, immediate support level is provided by the mid-band at 176.90, followed by the November 2 low of 175.70. A breach of this level could expose the lower limit of Bollinger Band around 175.30.
On the topside, initial resistance level is aligned with the upper Bollinger Band near 178.45, where sellers may re-emerge. A clear break above this level would pave the way to the 180.00 psychological level, en route to the more significant 100-day SMA resistance at 181.70.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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