EUR/JPY Price Forecast: Slips below 178.00 as bearish bias persists beneath the 100-day SMA

• At around 177.90, EUR/JPY trades lower in early European dealing on Thursday.
• Below the 100-day SMA, the bias remains bearish, although a neutral RSI leaves scope for further consolidation.
• Support initially lies at 176.90, while 178.45 marks the first resistance level.

Minutes from the Bank of Japan's (BoJ) September meeting have strengthened expectations of further interest rate increases, supporting the Japanese Yen (JPY) against the Euro (EUR). EUR/JPY consequently trades lower at around 177.90 in Thursday's early European session.

With underlying inflation nearing the central bank's 2% target, most BoJ policymakers considered further rate rises appropriate, according to the September meeting minutes published on Thursday.

As the central bank weighed developments in the Middle East, increasing demand associated with Artificial Intelligence (AI) and Foreign Exchange (FX) movements, one board member suggested there might be scope to quicken the pace of interest rate increases.

A hawkish European Central Bank (ECB), however, could cushion the EUR's decline. Speaking on Tuesday, ECB Governing Council member Joachim Nagel said a deteriorating inflation outlook meant the central bank would probably raise borrowing costs next month. Although economists anticipate that next month's rate move will be the last, markets expect tightening to extend into 2027.

Eurozone stagflation risks rise as stronger inflation and slower growth challenge ECB

Euro area headline inflation was “rising to 4.0% y/y in October, above our expectation of 3.8%,” Standard Chartered analysts say, citing the latest Eurostat figures. They argue that this “signals upside risks to the European Central Bank’s (ECB’s) September projection of 3.6% average inflation in Q4.” Turning to economic activity, the analysts observe that, “stripping Ireland out, euro area GDP growth was a more modest 0.2%, and, crucially, growth momentum has been falling steadily since Q4-2025.”

For Standard Chartered, the “combination of weakening growth momentum (using euro area ex Ireland data) and still-rising inflation creates a growing policy dilemma for the ECB,” although “inflation dynamics (and the risk of second-round effects)” are likely to take precedence for now. The bank describes this as “underpinning our expectation of another 25bps hike at the December meeting.” Its analysts emphasise that “stagflation is not our base case; we expect growth to remain positive and inflation to begin falling early next year,” but warn that “the direction of travel is that way, and the forces that could produce stagflation in coming quarters are apparent: higher energy prices that are squeezing real income and weighing on corporate profit margins; ECB monetary tightening operating with lagged effects on household and corporate borrowing costs; and tighter financial conditions weighing on broader activity.”

Nagel signals probable December rate rise as inflation threats mount

An FXS Speechtracker score of 8.2, compared with a historic 7.0, points to a more hawkish-than-usual message from the ECB's Nagel, with a December rate increase described as “very likely to be necessary.” His focus on inflationary pressures exceeding expectations and approaching an adverse scenario highlights a clear preference for tightening, lending further support to the Euro through rate expectations.

By insisting that a surge in energy prices must not feed into broad-based inflation, Nagel indicates a willingness to act again. At the same time, he places France's fiscal difficulties outside monetary policy's remit. For Euro traders, the forceful inflation warnings and confidence that budget problems will be addressed sustain a hawkish reading, with price stability remaining the priority.

Technical Analysis: EUR/JPY retains bearish bias below the 100-day SMA

Despite its recent recovery from the lower Bollinger Band, EUR/JPY is still undergoing a correction on the daily chart. Trading below the 100-day Simple Moving Average (SMA) leaves the broader outlook bearish. A move back above support at the 20-day Bollinger SMA points to some near-term stabilisation, while the Relative Strength Index (RSI), at 53.4, has entered neutral-to-positive territory. This suggests selling momentum has eased, without yet overcoming the broader restraint from the higher moving averages.

The mid-band at 176.90 offers the nearest support, ahead of the 2 November low at 175.70. Below that low, the lower Bollinger Band around 175.30 could come into view. 

Near 178.45, the upper Bollinger Band provides the first resistance, with sellers potentially returning there. A decisive break higher would open the way towards the psychological 180.00 mark, followed by the more significant resistance at the 100-day SMA of 181.70.

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