Yen Strengthens on Hawkish BoJ Bets; Euro Awaits CPI Catalyst

Key Takeaways:

*USD/JPY slipped 0.25%, with the yen up ~1% over the past month, driven by BoJ Governor Ueda’s hawkish signals of a possible September rate hike.

*Tokyo Core CPI held at 2.5%, reinforcing expectations of policy tightening at the September 20 meeting.

*EUR trades in a sideways-to-bullish pattern as markets await Eurozone CPI near 2%, which could back the ECB’s steady policy stance.

Market Summary:

The Japanese yen is showing signs of breaking out of its prolonged bearish cycle, with the USD/JPY pair slipping 0.25% yesterday and the yen strengthening by nearly 1% over the past month. This marks a notable shift from the overwhelming bearish sentiment that has dominated recent months.

The turnaround gained momentum after BoJ Governor Kazuo Ueda’s hawkish remarks at the Jackson Hole Economic Symposium, where he highlighted reduced trade risks with the U.S., sustainable inflationary pressures, and improved wage growth. These conditions, Ueda noted, set the stage for a potential rate hike in September, fueling short-term yen demand.

In today’s session, traders focused on the Tokyo Core CPI, which printed at 2.5%—in line with expectations. A steady inflation rate supports hawkish speculation that the BoJ may tighten policy at its September 20 meeting, further boosting the yen’s near-term outlook.

Meanwhile, the euro is trading in a relatively sideways but mildly bullish pattern as investors await the upcoming Eurozone CPI release. The market is eyeing a reading near 2%, which would affirm the ECB’s steady monetary stance and potentially lend more support to the single currency in the near term.

Technical Analysis 

EURJPY, H4

The EUR/JPY pair has been trading within a broad range after touching its 2025 peak, reflecting heightened indecision in the market. Earlier, the pair broke below its established uptrend channel, despite gaining over 6% from the June lows. This was followed by the formation of a “W” pattern, signaling a bullish reversal that fueled a strong rally.

However, recent price action shows the bullish momentum losing steam, with the pair now forming a lower-high structure and a descending triangle pattern, both of which indicate a bearish bias. Momentum indicators reinforce this view, with the RSI hovering near the mid-level and the MACD slipping below the zero line, suggesting a potential bearish tilt in the sessions ahead.

Resistance level:173.00, 174.60

Support level: 170.00, 168.20