Euro steadies as Eurozone PMIs beat forecasts

• EUR/JPY consolidates around 181.94 after recovering roughly 200 pips from the intervention-driven lows.
• Eurozone services activity surprised to the upside in July with Spain's HCOB Services PMI jumping to 58.3.
• Eurozone Retail Sales are forecast to slow to 1% YoY in June from 1.6%, tempering the improved sentiment.

EUR/JPY trades broadly flat near 181.94 on Wednesday, up a marginal 0.01% as the cross pauses after a steady four-session recovery. The pair has clawed back a significant portion of the collapse triggered by last week's Japanese intervention and the Bank of Japan's (BoJ) hawkish hold, with buyers gradually restoring a series of higher lows.

The Euro (EUR) drew support from a stronger-than-expected batch of final services surveys. Spain's HCOB Services Purchasing Managers Index (PMI) surged to 58.3 in July, comfortably above the 55.3 preliminary estimate and well up from the previous 54.2. Germany's Services PMI was revised higher to 49.8 from 49.6, although it remains below the 50 threshold that separates expansion from contraction, while the German Composite PMI gauge improved slightly to 51.3. The Eurozone Composite PMI rose modestly to 52 from the 51.9 flash reading, pointing to a gradual private-sector recovery led by the periphery.

On the Japanese side, the BoJ released the Minutes of its June policy meeting overnight. The document predates both the suspected intervention and last week's 8–1 vote to hold rates at 1%, limiting its capacity to move markets, but investors combed through the discussion for early evidence of the hawkish shift that has since taken hold within the board. Policymakers were debating price risks that would likely require further rate hikes even as they raised borrowing costs to a 31-year high at that same meeting. The board voted 7-1 to lift the policy rate by 0.25 percentage points to around 1%, with Asada Toichiro dissenting on the grounds that downside risks to production and employment outweighed upside price risks.

Governor Kazuo Ueda has repeatedly signaled that the central bank is prepared to accelerate the pace of normalization, and the threat of renewed official Yen buying continues to discourage aggressive positioning against the Japanese currency.

Attention now turns to Eurozone Retail Sales. Consumer spending is expected to rise just 0.1% MoM in June, down from 0.2%, with the annual pace slowing to 1% from 1.6%. A soft print would sit awkwardly alongside the upbeat services surveys and suggest that improved business sentiment has yet to translate into household demand, potentially capping the Euro's advance. A beat, by contrast, would strengthen the case that the recovery is gaining traction and give the cross room to extend toward the upper end of its range.

Short-term technical analysis:

On the 4-hour chart, EUR/JPY trades at 181.94. The cross is consolidating after its recent decline, holding just above the 20-period Simple Moving Average (SMA) at 181.70 while remaining well below the 100-period SMA at 185.09, which keeps the broader tone capped. Nearby horizontal resistance at 182.17 limits recovery attempts, and the Relative Strength Index (RSI) around 42 suggests only modest bearish momentum rather than a strongly directional move.

On the topside, initial resistance emerges at 182.17, where a break would be needed to open space toward the more distant 100-period SMA at 185.09. On the downside, immediate support is clustered around 181.75 and the 20-period SMA at 181.70; a sustained drop below this area would expose the next horizontal floors at 181.21 and 180.25, where buyers could attempt to stabilize the cross again.

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