Can a Bank of Japan rate hike weigh on EUR/JPY?

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Euro vs Yen drops 0.5% today

Highlights

The Bank of Japan raised its short-term interest rate target to 1.25% from 1.00% with a 7-2 majority vote.
The narrower rate gap with the euro supports the yen through increased capital inflows and reduces upward pressure on EUR/JPY.
EUR/JPY trades below key moving averages with sustained seller pressure, and the expected range is ¥178.99 to ¥180.79 with a 72% probability of a downward move in the short term.

Yen supported as Bank of Japan narrows policy rate gap

On September 24, the Bank of Japan raised its short-term interest rate target to 1.25% from 1.00% in a 7-2 vote, according to Fxstreet. This move narrows the rate differential with the euro and tends to support the yen by attracting greater capital inflows, thereby reducing upward pressure on EUR/JPY. The adjustment reflects ongoing monetary policy normalization by the BOJ and has contributed to subdued demand for the cross during this session.

Multi-timeframe seller control persists as momentum remains soft

Technical indicators reveal that EUR/JPY stays below the 20-period, 50-period, and 200-period moving averages on the H1 chart, underscoring persistent seller control at multiple timeframes. The Ichimoku Kijun on the same timeframe is positioned at ¥180.3, serving as initial resistance. Momentum readings from MACD and ADX remain neutral, while RSI is soft at 35.51. Both Stochastic RSI and CCI signal oversold conditions, in line with weak price momentum. Bull/Bear Power readings and the Awesome Oscillator both point to continued intraday selling activity.

Downside risk elevated as volatility confines trading range

For the next two to three trading sessions, EUR/JPY is expected to range between ¥178.99 and ¥180.79, consistent with typical volatility for the pair. The probability of a further decline is assessed at 72%, compared to a 28% chance of a rebound. A sustained move above ¥180.3 would be required to trigger a bullish scenario, while a break below ¥178.99 would likely accelerate downside momentum in the near term.

Anton Kharitonov, expert at Traders Union, sees a cautious environment for EUR/JPY after the BOJ rate hike and persistent technical weakness. Price remains trapped below key moving averages, and sentiment is undermined by increased yen support. Probability still favors further downside while resistance at ¥180.3 caps upside attempts. "Base case remains defensive — unless we see a sustained breakout above ¥180.3, sellers control the short-term narrative."

Previously it was reported that EUR/JPY faced persistent bearish pressure, remaining below key technical levels as sellers maintained control. The recent Bank of Japan rate hike and the pair's continued inability to reclaim major moving averages reinforce the downside scenario, with traders advised to monitor for a decisive move below ¥178.99 as a potential catalyst for further weakness.

Source of Data: EUR Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.