The EUR/JPY currency pair gained traction, trading around 185.20 during the early European session on Thursday, as the Japanese Yen weakened against the Euro following disappointing Japanese Gross Domestic Product (GDP) data for the second quarter. Japan's Q2 GDP expanded by 0.3%, falling short of both the previous quarter's 0.5% growth and the market consensus of 0.5% growth. Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute, noted that there were concerns Japan's economy could slip into negative growth due to higher import prices and supply constraints related to the Iran situation [1].
Despite the weak GDP figures, market participants are anticipating Japan's National Consumer Price Index (CPI) inflation report, scheduled for release on Friday. Meanwhile, overnight index swaps are pricing in about an 80% chance of a Bank of Japan (BoJ) rate hike at the next policy meeting, according to Reuters. However, some market bets suggest the BoJ could raise interest rates as early as September 2026, which may help limit further losses for the Yen [1].
On the European side, Danske Bank analysts expect only one more 25 basis point rate hike from the European Central Bank (ECB), stating that the case for further policy tightening is likely to diminish after that move [1].
Technical analysis indicates that EUR/JPY maintains a bullish near-term bias, with the price holding above the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. The Relative Strength Index (14) stands at 56.75, above the neutral 50 line, suggesting constructive momentum as the pair consolidates just below recent highs. Immediate resistance is identified at the June 17 high of 186.32, with the next target at the upper Bollinger Band around 187.50. On the downside, support is seen at the 100-day SMA at 185.10, followed by the Bollinger middle band near 184.00, and further at the August 10 low of 182.70 and the lower Bollinger Band at 180.55 [1].
CONCLUSION
EUR/JPY's upward momentum is supported by weak Japanese GDP data and bullish technical signals, while market expectations for a potential BoJ rate hike and a restrained ECB tightening outlook shape the near-term outlook. Traders are closely watching upcoming Japanese CPI data and key technical levels for further direction.