Today, Friday, the EUR/JPY pair is showing gains but remains below the monthly high recorded earlier this week. Still, there is hope that spot prices will attempt to break through the round level of 173.00.
This week's European statistics indicated a slight increase in inflation in August, which remains close to the European Central Bank's 2% target. This strengthens market expectations that the regulator's rate-cutting cycle is ending, which continues to support the single currency and the EUR/JPY pair.
ECB Executive Board member Isabel Schnabel noted on Tuesday that current policy already has a moderately accommodative tone, stressing that there are no grounds for further rate cuts. Another ECB Governing Council member, Gediminas Simkus, also stated that rate adjustments are not needed at the moment. In addition, the weakening U.S. dollar is favoring the euro.
Meanwhile, the Japanese yen is drawing some support from positive domestic data, with real wages showing growth for the first time in seven months. Moreover, household spending in Japan increased in July, albeit at a slow pace, suggesting that the Bank of Japan will continue moving toward policy normalization.
On top of that, on Thursday, U.S. President Donald Trump signed an order reducing tariffs on Japanese car imports. This further strengthens the yen and deters traders from actively buying the EUR/JPY pair. Ahead, revised euro area GDP data for the second quarter are expected, which may add momentum to the movement.
From a technical perspective, the pair is attempting to break resistance at the round level of 173.00, above which the next barrier will be 173.50, on the way to 174.00. Support has been found at 172.70. Failure to hold this level would push prices toward the confluence of the 9- and 14-day EMAs, to the round level of 172.00. It is worth noting that oscillators on the daily chart are positive; however, as long as the 9-day EMA remains below the 14-day EMA, prices will not be able to reach the 174.00 round level.
