The EUR/JPY currency pair traded in positive territory around 177.30 during early European trading hours on Wednesday, as the Japanese Yen weakened against the Euro due to a cautious outlook from the Bank of Japan (BoJ) regarding interest rate hikes [1]. According to Bloomberg, BoJ policymakers are currently leaning against implementing a rare back-to-back interest rate increase this month, opting instead to closely examine economic data before considering another hike, which could occur as soon as December [1]. Market pricing in the overnight swaps market reflects a nearly 10% probability of a rate hike this month, with the likelihood rising significantly to 88% for a move by December [1].
From a technical perspective, EUR/JPY maintains a bearish near-term bias, trading decisively below both the Bollinger middle band and the 100-day simple moving average (SMA) [1]. The Relative Strength Index (14) stands at 36.41, indicating subdued momentum but not yet reaching oversold territory, which suggests weak selling pressure rather than an exhausted downtrend [1]. Immediate resistance is identified at the Bollinger middle band and 20-period SMA near 178.45, with further resistance at the psychological 180.00 level and the upper Bollinger band at 181.05, followed by the 100-day SMA at 183.05 [1]. On the downside, initial support is at the lower Bollinger band around 175.90, with subsequent levels at the October 20 low of 175.34 and the October 2 low of 172.27 [1].
Traders are also closely monitoring an upcoming speech by European Central Bank (ECB) President Christine Lagarde, which could provide additional direction for the pair [1]. The overall market sentiment remains cautious, with the EUR/JPY pair showing gains but still capped by key technical resistance levels and a lack of strong bullish momentum [1].
CONCLUSION
EUR/JPY is trading higher amid a cautious BoJ rate outlook, but remains technically bearish below the 100-day SMA. Market participants are watching for further signals from both the BoJ and the ECB, with significant resistance and support levels in focus. The probability of a BoJ rate hike increases toward December, keeping traders attentive to upcoming economic data and central bank communications.