FX.co ★ EUR/JPY

Technical and Fundamental Analysis of the EUR/JPY Pair On Thursday, EUR/JPY pushed higher toward the 185.20 area, extending its recent advance as the Japanese yen (JPY) came under pressure following weaker-than-expected economic data from Japan. The softer GDP reading raised fresh concerns about the strength of the Japanese economy, while traders shifted their attention to Japan's national Consumer Price Index (CPI) report scheduled for release on Friday. Japan's economy grew by 0.3% in the second quarter, slowing from the previous reading of 0.5% and falling short of market expectations for another 0.5% expansion. The weaker growth figure highlights the challenges facing the economy, particularly from higher import costs and continuing supply disruptions. Yoshitaka Shinkai, senior executive economist at the First Life Institute, warned that rising import prices and supply constraints linked to the worsening situation involving Iran could place further pressure on growth and potentially increase the risk of an economic contraction. Despite the disappointing GDP report, the downside for the Japanese yen could remain limited if expectations for another Bank of Japan (BoJ) rate hike continue to strengthen. Markets are increasingly betting that the BoJ could raise interest rates as early as September 2026. Overnight index swap pricing cited by Reuters suggests investors are assigning roughly an 80% probability to a rate increase at the central bank's next policy meeting. The euro, meanwhile, continues to receive support from expectations that the European Central Bank (ECB) may still have room for one more increase in borrowing costs. Danske Bank analysts remain cautious about the longer-term tightening cycle but continue to expect the ECB to deliver one additional 25-basis-point rate hike. Their outlook suggests that another move remains possible, although the case for further tightening beyond that point could become increasingly limited. This creates an interesting fundamental backdrop for the EUR/JPY exchange rate. Expectations of another ECB rate hike continue to support the euro, while rising expectations for a BoJ policy move could eventually strengthen the yen and slow the pair's advance. Friday's Japanese inflation report may therefore become an important driver for EUR/JPY, particularly if the data changes market expectations regarding the timing and scale of future BoJ monetary tightening. EUR/JPY is trading near 185.30, maintaining a positive short-term structure as the pair remains above key moving averages and recent recovery levels. On the H4 timeframe, price action continues to favor buyers, with pullbacks attracting demand and the broader structure holding above important technical support. However, the pair is approaching notable resistance, which could slow the current advance unless buyers generate stronger momentum. A well-defined H4 demand zone is located between 184.20 and 184.70, where previous swing lows and consolidation periods repeatedly attracted buying interest. This remains an important support area if EUR/JPY pulls back from current levels. A deeper demand zone can also be identified around 183.70–184.00, where earlier price consolidation and previous breakout activity created another potential layer of support. On the upside, the main H4 supply zone sits around 186.00–186.40, aligning with previous rejection highs and the June peak near 186.32. Sellers have previously defended this region, making it a major barrier for the current bullish move. A sustained break above this zone could open the door toward the next resistance area around 186.80–187.20. The 20-period SMA on the H4 chart is positioned below price in the mid-184.80s, acting as dynamic support during pullbacks. The 50-period SMA sits slightly lower around 184.50–184.60, reinforcing the broader bullish structure while price remains above both moving averages. As long as the faster average continues to hold above the slower one, the underlying momentum remains constructive. On the H1 timeframe, EUR/JPY maintains a bullish but slightly tighter structure. Immediate demand is concentrated around 184.80–185.10, which aligns with the recent breakout base and an important moving-average support area. A deeper intraday demand pocket sits near 184.40–184.60, overlapping with the broader H4 support structure. Immediate H1 supply is positioned between 185.60 and 185.90, where recent rallies have faced selling pressure and formed several rejection points. A clear break above this zone could allow EUR/JPY to test the stronger 186.00–186.40 resistance area.