The Euro/Japanese Yen (EUR/JPY) currency pair remained steady around 180.25 during early European trading hours on Monday, with Japanese markets closed for a three-day holiday, resulting in low liquidity conditions. Traders are closely monitoring the possibility of currency intervention by Japanese authorities, following reports from the Nikkei newspaper that officials conducted rate checks—a move often seen as a precursor to intervention in the foreign exchange market [1].
The Bank of Japan (BoJ) raised its policy rate by 25 basis points to 1.25%, marking the highest level since 1995, in line with market expectations. However, the absence of explicitly hawkish forward guidance from the BoJ disappointed market participants, which weighed on the Japanese Yen against the Euro [1]. Swaps markets currently price in less than a 20% chance of another rate hike at the next policy meeting at the end of October, but see a 90% probability of a rate increase at the December meeting [1].
Economists at DBS highlighted that investors have already priced in a second BoJ rate hike in December and a third by April next year, leaving the Yen vulnerable if the central bank's guidance does not meet these expectations. They cautioned that "policy guidance that is not quite as hawkish could see a resumption of JPY selling pressures," especially given the deeply negative real rates and ongoing inflation pressures from energy shocks. DBS also noted that it would be "quite a surprise if Governor Ueda does not reinforce a vigilant stance and signal the possibility of more near-term hikes" [1].
On the technical front, EUR/JPY remains capped below the 100-day Simple Moving Average (SMA), with the daily chart showing a bearish near-term tone. The Relative Strength Index (RSI) is at approximately 41.7, below the neutral 50 line, indicating subdued bullish momentum. Key resistance levels are identified at 181.55 (Bollinger middle band), 184.18 (100-day SMA), and 187.45 (upper Bollinger band), while notable support is seen at 175.6 (lower Bollinger band) [1].
European Central Bank (ECB) President Christine Lagarde stated that any further ECB rate hikes "will depend on the future," with decisions to be made "meeting by meeting." She added that a rate cut is "very unlikely at the moment" [1].
CONCLUSION
The EUR/JPY pair is steady amid low liquidity and heightened intervention risks, as the BoJ's rate hike failed to provide a hawkish surprise. Market expectations for further BoJ tightening remain high, but the Yen could face renewed selling if guidance disappoints. Technical indicators suggest a bearish bias persists for EUR/JPY in the near term.