FX.co ★ Wiking | EUR/JPY

The EUR/JPY cross is seen trading in the red zone at 177.80 in the European session on Thursday. The Japanese Yen (JPY) strengthened against the Euro (EUR) after the Bank of Japan (BoJ) released minutes from its September policy meeting, highlighting the possibility of further rate hikes. According to the minutes of the September policy meeting published on Thursday, most BoJ policymakers agreed that interest rate hikes were justified as underlying inflation approached the central bank's 2% target. One board member said there could be scope to accelerate interest rate rises as the central bank gauged the impact of the Middle East situation, increased demand due to Artificial Intelligence (AI), and Foreign Exchange (FX). On the flip side, a hawkish tone from the European Central Bank (ECB) might help cap the EUR's losses. ECB Governing Council member Joachim Nagel said on Tuesday that the central bank would likely hike borrowing costs next month given the deteriorating inflation outlook. Economists forecast a last move in rates next month, although the market expects more tightening beyond that into 2027. The analysts at Standard Chartered point out that the most recent Eurostat data "showed euro area headline inflation rising to 4.0% y/y in October, higher than our forecast of 3.8%, implying upside risk to the ECB September projection of 3.6% average inflation in Q4." On the activity front, they add that "excluding Ireland, euro area GDP growth was a more modest 0.2%, and, importantly, growth momentum has been declining steadily since Q4-2025." As stated by Standard Chartered, "we think that such a combination of a deceleration in growth (using euro area excluding Ireland data), and rising inflation poses an increasing policy dilemma for the ECB," where "inflation trends (and the risk of second-round effects)" are expected to dominate for the time being and "supporting our expectation of another hike of 25bps at the December meeting." Although they say that "we believe that stagflation is not the baseline scenario; our forecast is one where the economy continues growing while inflation starts to fall early next year," the bank adds that "the general direction seems to be heading in that path; and there are clear forces that may lead to stagflation in coming quarters: rising energy prices which are pressuring real incomes and corporate profitability; ECB monetary policy with lagging impacts on borrowing costs for households and corporations; and financial conditions becoming tighter overall." However, ECB's Nagel has been more hawkish than before, with an FXS Speechtracker of 8.2 compared to the historical level of 7.0, since a December rate hike is considered "very likely to be necessary". High inflationary pressure and proximity to an adverse situation create a tight bias, supporting the Euro on rate expectations. Nagel's claim that an energy price surge should not result in broader inflation shows a willingness to act, even if fiscal concerns in France are treated as irrelevant to the scope of monetary policy. Inflationary risk, along with assurance on budget matters, will help keep the focus on price stability.

According to the daily chart, EUR/JPY remains in a corrective period as price continues to trade below the 100-day SMA. This makes the overall trend bearish even after a recovery from the lower Bollinger Band. Price has recovered the 20-day Bollinger SMA support level, indicating a brief consolidation. At the same time, the RSI reading of 53.4 has moved into the neutral-to-positive zone, showing no bearish momentum; however, the overall cap set by the higher averages remains intact. The first support level comes from the mid-Bollinger Band level of 176.90, followed by the November 2 low of 175.70. Breaking below this level will push price toward the lower Bollinger Band level of 175.30. On the topside, the first resistance is the upper Bollinger Band level of 178.45. Once this level breaks, price will move toward 180.00, then toward the next resistance level of 181.70, the 100-day SMA.