Today market outlook

[Zeologic]

EUR/JPY extends gains, nearing the 186.315 peak

The EUR/JPY cross-currency pair is displaying interesting price dynamics. The pair has risen for five consecutive days, reflecting the Japanese Yen's weakness against the Euro. The price currently hovers around the 185.725 level on the FXOpen chart, up from a low of 184.635 during Tuesday's trading session.

EUR/JPY price movements reflect a fierce tug-of-war between easing inflation in the Eurozone and the threat of market intervention by Japanese authorities.

On the Eurozone front, inflation is cooling, easing pressure for a hawkish stance. German CPI data released yesterday showed a decline to 2.3% year-on-year, down from the previous 2.5%. Germany's HICP index also fell to 2.4%. The easing of inflation in Europe's economic powerhouse provides an early indication that inflation across the Eurozone is also cooling.

These moderating inflation figures reduce pressure on the ECB to adopt an overly aggressive stance going forward. Market expectations for further interest rate hikes are very limited, generally capping the Euro's potential for appreciation.

Regarding the Japanese Yen, there are threats of verbal intervention and the risk of actual market action. EUR/JPY touched a high near 185.74 yesterday. The Yen's excessive weakness has triggered alarm bells in Tokyo. Japanese Finance Minister Satsuki Katayama and Chief Cabinet Secretary Minoru Khara have again issued stern warnings that they are prepared to take action in the forex market to stabilize the Yen's movements.

The threat of currency intervention has caused investors to hold back, limiting aggressive buying of EUR/JPY due to the high risk of a sudden price reversal triggered by such intervention. Meanwhile, Japan's core inflation remains at 1.4%—below the Bank of Japan's (BoJ) target—meaning the BoJ is in no rush to drastically raise interest rates.

At the ECB forum held in Sintra, Portugal, from June 29 to July 1, 2026, ECB President Christine Lagarde signaled a crucial shift, stating that the ECB's monetary policy has returned to fundamental principles. The current focus is on controlling inflation via benchmark interest rates, eliminating the need for the non-standard emergency instruments—such as massive post-pandemic asset purchases—used previously.

Lagarde emphasized that the ECB no longer needs to act aggressively. Any future interest rate cuts or adjustments will be implemented gradually and cautiously, remaining highly dependent on economic data released ahead of each meeting.

From a technical perspective, the EUR/JPY pair is currently in overbought territory on the daily chart and is being constrained by psychological barriers due to the risk of intervention. EUR/JPY is expected to trade within a range of approximately 183.80–186.20. Immediate support lies around 184.50, with the next target at 183.40. Immediate resistance is around 185.80, with the next target in the 186.20 range. This forecast could be wrong.