Today marks the fourth consecutive day of an uptrend in the EUR/JPY pair, which is also the sixth positive session in the past seven days. Spot prices have reached a new two-week high, and given the prevailing trend of selling the Japanese yen, there is a possibility that the pair could surpass the 173.00 level.

Uncertainty over the timing of the Bank of Japan's next interest rate hike, combined with rising risk appetite, continues to weigh on the yen, traditionally considered a safe-haven currency. This creates favorable conditions for the euro to strengthen against the yen. Investors appear to believe that prospects for further normalization of the Bank of Japan's monetary policy could be delayed due to domestic political instability and the negative impact of higher U.S. tariffs on Japan's economy.

On Wednesday, data showed that Japan's Corporate Goods Price Index (CGPI) rose by 2.6% year-on-year in July, while declining by 2.9% compared to the previous month. This comes amid six consecutive months of falling real wages — the June data confirmed a continued decline — which raises concerns about economic recovery through domestic consumption. The yen is also under pressure from the extension of the U.S.–China trade truce and the U.S.–Russia summit aimed at ending the conflict in Ukraine.

On the other hand, the euro is supported by the weakening U.S. dollar following the release of U.S. Consumer Price Index data. Additionally, expectations that the European Central Bank will keep rates unchanged until the end of 2025 are helping to strengthen the euro. However, these expectations differ significantly from forecasts of a possible Bank of Japan rate hike by year-end.

It is also worth noting that the Bank of Japan revised its inflation forecast following its July meeting and reaffirmed its readiness to raise interest rates if certain price and inflation growth conditions are met. This could deter yen bears from taking overly aggressive positions. In the absence of significant economic data, the current fundamental backdrop calls for caution when considering further EUR/JPY purchases.

From a technical standpoint, the break above the 100-period SMA on the 4-hour chart this week favors the bulls. Oscillators on the same chart are also in positive territory.

Resistance is located at the 173.00 level. Support is at 172.30, with key support at the 172.00 level. A drop below this threshold could open the way for further declines. However, as long as oscillators on the daily chart remain positive, buyers retain strength to defend their positions.

The table below shows the yen's performance against major currencies over the past seven days.

The strongest gain was recorded against the Canadian dollar.