Euro elevates ahead of ECB decision and Japanese inflation data

• EUR/JPY trades slightly higher near 186.20 as the Yen remains weak and investors await the ECB policy decision.
• The ECB is expected to keep its refinancing rate at 2.40% and deposit rate at 2.25%, with Lagarde’s press conference key for the Euro outlook.
• Japan’s core CPI is forecast to rise to 1.6% YoY from 1.4%, with stronger inflation potentially supporting BoJ tightening expectations and the Yen.

EUR/JPY trades marginally higher near the 186.20 area on Wednesday as the Japanese Yen (JPY) remains under pressure near multi-decade lows. The Euro (EUR) is relatively stable as investors avoid taking large positions ahead of the European Central Bank’s (ECB) monetary policy announcement.

The ECB is expected to leave the Main Refinancing Operations Rate unchanged at 2.40% and the Deposit Facility Rate at 2.25%. The central bank raised its three key rates by 25 basis points in June, making President Christine Lagarde’s press conference particularly important for signals about further policy tightening.

Eurozone Consumer Confidence will also be monitored and is expected to improve to -16.8 in July from -17.7. A stronger reading and a hawkish ECB message could support the Euro, while concerns about economic growth may limit gains.

In Japan, attention will turn to the June Consumer Price Index report, scheduled for Friday. Core CPI Excluding Fresh Food is expected to accelerate to 1.6% YoY from 1.4%. Headline inflation previously stood at 1.5%, while CPI Excluding Food and Energy was recorded at 1.8%.

Stronger-than-expected Japanese inflation could reinforce expectations of additional Bank of Japan tightening and support the Yen. However, a softer report combined with a hawkish ECB stance could keep EUR/JPY elevated.

Short-term technical analysis:

On the 4-hour chart, EUR/JPY trades at 186.17 with a bullish near-term bias, as the pair holds above both the 20-period Simple Moving Average (SMA) at 185.83 and the 100-period SMA at 185.32. A tight cluster of nearby horizontal levels between 185.91 and 186.07 reinforces this underlying demand zone just beneath spot, while the Relative Strength Index (RSI) at 63 shows firm but not extreme positive momentum, suggesting the risk remains skewed toward further gains while these supports are defended.

On the topside, immediate resistance is located at the horizontal barrier at 186.19, where a clear break would open the way for a continuation of the uptrend. On the downside, initial support is seen at the 186.07–186.04 band, followed by the prior reaction floor at 185.91 and the 20-period SMA at 185.83; a deeper pullback would expose the 100-period SMA at 185.32 and then the lower structural supports at 184.06, 183.82 and 183.67.

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