FX.co ★ HNB | EUR/JPY

The EUR/JPY cross has extended its corrective slide for a second consecutive session, settling near the 183.80 mark during Friday’s Asian trading. This retreat is largely a function of a strengthening Japanese Yen, which found a technical floor following a complex set of inflation data out of Tokyo. While the headline CPI for the capital region edged up to 1.6%, the core reading (excluding fresh food) decelerated to 1.8%. Although this marks the first time Tokyos core inflation has dipped below the Bank of Japan’s (BoJ) 2% target since 2024, the figure still landed above the market’s conservative 1.7% forecast. This "sticky" inflationary pressure, despite the broader slowdown, has reinforced the narrative that the BoJ remains on a normalization path, particularly after Governor Kazuo Ueda reiterated that the bank’s baseline position is to continue raising rates if economic projections are met. From a structural perspective, the EUR/JPY pair is currently testing the lower boundary of its short-term bullish channel. The technical picture is further complicated by mixed signals from the Eurozone; while the Euro had been buoyed by "risk-on" sentiment earlier in the week, it is now facing headwinds from a cooling German labor market. Preliminary data for February showed that German unemployment increased by 1,000, a modest rise that was actually better than the 2,000-person increase economists had feared, yet it still left the national unemployment rate stalled at a multi-year high of 6.3%. This stagnation in Europes largest economy, coupled with the BoJs hawkish undertones, has created a "pincer effect" on the cross, as traders shift capital away from the Euro in anticipation of a more cautious European Central Bank. Technically, the 183.33–183.50 zone represents the immediate "line in the sand" for bulls. This area coincides with the 9-day Exponential Moving Average (EMA) and a previous resistance-turned-support level. A decisive daily close below this floor would likely invalidate the recent uptrend and open the door for a deeper retracement toward the 180.81 February low. Conversely, if the pair can maintain its footing here, a move back toward the 186.00 psychological resistance remains the primary objective. As market participants pivot their focus toward the afternoon’s release of German and broader Eurozone CPI figures, the volatility in EUR/JPY is expected to intensify. Any sign that European inflation is falling faster than Japans could accelerate the yen-cross breakdown as yield differentials begin to narrow in favor of the Yen.