EUR/JPY. Price Analysis. Forecast. EUR/JPY Exchange Rate Declines Amidst BOJ's Hawkish Rhetoric

[Ben Graham]

The EUR/JPY rate is decreasing. This decline reflects a resumption of yen strengthening, supported by recent signals from the Bank of Japan, while the euro attempts to maintain its position amid more stable monetary policy prospects in the Eurozone.

The Japanese yen has strengthened following the BOJ's publication of the results from its December monetary policy meeting. During discussions, board members noted the need to further tighten conditions, even after the recent rate hike. Recall that the central bank raised the key interest rate from 0.50% to 0.75%—a level not seen in many decades. Some participants expressed confidence that the current interest rate level still does not reflect inflation dynamics, as it is too low. Others emphasized that the yen's weakness and the rise in long-term bond yields are partly due to excessively loose monetary policy, which has heightened expectations of a new rate hike in 2026, thereby providing additional support for the Japanese currency.

In Europe, the situation appears less clear-cut. The European Central Bank (ECB) maintained rates at its last meeting this month and indicated that it has no intention of revising them in the near future. European Central Bank President Christine Lagarde noted that high uncertainty makes it difficult to provide precise forecasts, so the bank's policy will be shaped by incoming data and decisions made after each meeting. According to money-market estimates, the probability of a 25-basis-point rate cut by the ECB in February does not exceed 10%. This perception of the end of the easing cycle limits the pressure on the euro.

Overall, the BOJ's decisively hawkish stance adds further pressure on the EUR/JPY pair, while the ECB's cautious stance on rate changes serves as a short-term stabilizing factor. According to the table, the yen posted the largest gain on Monday against the New Zealand dollar.

From a technical perspective, the pair found good support at the 9-day EMA near the 183.40-183.45 zone. The nearest resistance level is at 184.45, while the primary resistance lies at the month's high. Oscillators on the daily chart are positive, confirming the optimistic forecast.

The material has been provided by InstaForex Company - www.instaforex.com