The Japanese Yen (JPY) strengthened significantly during the Asian session on Thursday, exerting downward pressure on both the EUR/JPY and GBP/JPY currency crosses. The EUR/JPY pair extended its losses for the second consecutive day, trading near 183.00 and testing immediate support at the lower boundary of a symmetrical triangle around 182.90. Technical indicators show a bearish near-term bias, with the cross trading below both the nine-period and 50-period Exponential Moving Averages (EMAs), and the 14-day Relative Strength Index (RSI) at 37.31 approaching oversold territory. A break below the triangle could push EUR/JPY toward the nine-month low of 179.37, recorded on August 3. On the upside, resistance is seen at the nine-day EMA of 184.72, the 50-day EMA of 184.76, and the upper boundary of the triangle at 185.80. The all-time high for the cross is 187.95, set on April 17 [1].
Similarly, the GBP/JPY cross experienced intense selling pressure for the second straight day, dropping to a three-and-a-half-week low around the 212.75-212.70 region. The firmer Yen is attributed to speculation about possible intervention by Japanese authorities, as well as a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations. Traders are now pricing in a high probability of a 25 basis point rate increase at the next BoJ policy meeting on September 17–18, with the potential for a follow-up move in December. Comments from BoJ board member Hajime Takata suggested the central bank should be more nimble with rate hikes, and Brown Brothers Harriman noted that Takata left the door open for a 50 or 75 basis point hike in September, with Governor Kazuo Ueda emphasizing the need to pay greater attention to upside inflation risks. This has led to market speculation that a 'jumbo' BoJ hike is a real possibility [2].
Despite the Yen's strength, borrowing costs in Japan remain much lower than in other major economies, which could keep the JPY carry trade active. Additionally, concerns about Japan's fiscal condition may temper aggressive bullish bets on the Yen. A weak US Dollar is also providing some support to the British Pound, potentially limiting further losses in the GBP/JPY cross [2].
Currency performance tables from both articles confirm the Yen's outperformance. The Euro was the weakest against the Japanese Yen on Thursday, while the Yen was the strongest against the New Zealand Dollar over the week [1][2].
CONCLUSION
The Japanese Yen's sharp appreciation, driven by hawkish BoJ signals and intervention speculation, has pressured both EUR/JPY and GBP/JPY crosses to multi-week lows. Technical and fundamental factors suggest further downside risk, though some mitigating factors may limit the extent of Yen gains. Market participants are now closely watching the upcoming BoJ policy meeting for confirmation of a potential rate hike.