Euro steadies against the Yen after ECB lifts rates

EUR/JPY rises above the 179.00 mark on Thursday in the aftermath of the European Central Bank (ECB) raising its deposit rate by a quarter point to 2.50%, its second hike since the US-Iran war broke out. The decision was fully expected and steadied a cross that had slid sharply over the past week from levels above 180.00. At the time of writing, EUR/JPY is up 0.40%, with the Euro (EUR) snapping the Japanese Yen's (JPY) three-day winning streak.

ECB President Christine Lagarde called the hike a "no-brainer" and, alongside upward inflation forecasts and an acknowledgment of the Eurozone's resilience, led investors to add to bets on further tightening. She stopped short of pre-committing to another move but warned that gas prices could rise on supply disruptions or a cold winter. Euro area inflation ran at 3.3% in August, driven by energy.

On another note, bets that the Bank of Japan (BoJ) will raise rates as soon as this month, together with suspected intervention to prop up the currency, sparked a rally over the past week that dragged EUR/JPY lower. An adviser to Prime Minister Sanae Takaichi said earlier this week the BoJ is likely to hike in September and deliver another increase by early next year.

Attention now turns to the BoJ, which meets on September 18 and is expected to weigh in with its own hike. A BoJ move would revive the Yen and pressure the cross, while a hold would leave the hawkish ECB in the driving seat. With Oil near $100 a barrel and the Middle East conflict still driving energy prices, both central banks remain focused on inflation.

Short-term technical analysis:

On the 4-hour chart, EUR/JPY trades at 179.38. The cross has bounced off its recent lows and now holds above the 20-period Simple Moving Average (SMA) at 178.81, hinting at a modest recovery while remaining well below the 100-period SMA at 183.51, which keeps the broader tone capped. The Relative Strength Index (RSI) has recovered toward the mid-40s from oversold territory, suggesting that bearish momentum has faded but a decisive trend is yet to emerge.

On the topside, immediate resistance is located at 179.46, where the latest horizontal barrier sits ahead of the distant 100-period SMA near 183.51, a level that would need to be reclaimed to reassert a stronger bullish bias. On the downside, initial support is seen at 179.05, reinforced by the nearby 20-period SMA and clustered horizontal levels at 178.78 and 178.54; a break below this band would expose a deeper pullback toward prior lows and undermine the current stabilisation.

(The technical analysis of this story was written with the help of an AI tool. Know more.)