The EUR/JPY currency pair strengthened to near 185.20 during the early European session on Wednesday, supported by expectations that the European Central Bank (ECB) will raise its key interest rate at its June policy meeting on Thursday [1]. This would mark the ECB's first rate hike in almost three years, positioning it as the first major central bank to tighten policy in response to rising energy prices linked to the conflict in the Middle East [1]. Money markets are already pricing in a second 25 basis points hike for September, though economists anticipate the ECB will maintain a 'gently hawkish' and highly data-dependent stance without committing to a fixed path [1].
Simona Delle Chiaie, chief euro-area economist at Bloomberg, stated, 'Lagarde may provide some indication of the ECB’s next move after she muddled communication on the rate outlook in March. We expect her to be clearer than in the past that a second hike may be in the pipeline' [1]. Any hawkish comments from ECB policymakers could further support the Euro against the Yen in the near term [1].
From a technical perspective, EUR/JPY maintains a constructive near-term bias, consolidating above the Bollinger middle band and the 100-day simple moving average, which suggests underlying demand on dips [1]. The Relative Strength Index (14) at 49.99 is neutral, indicating a pause rather than exhaustion after the recent upward movement [1]. Key resistance levels are identified at the Bollinger upper band near 186.05, the February 9 high of 186.24, and the January 23 high of 186.88 [1]. On the downside, support is seen at the Bollinger middle band around 185.15, the 100-day SMA at 184.50, and the lower Bollinger band near 184.25, where buyers are expected to emerge if the broader bullish structure holds [1].
CONCLUSION
EUR/JPY's recent strength is driven by expectations of an imminent ECB rate hike and a potentially hawkish policy outlook. Technical indicators suggest the pair is consolidating with underlying demand, while market participants await clearer guidance from ECB President Lagarde. The market's focus remains on the ECB's policy signals and their impact on the Euro's trajectory against the Yen.