EUR/JPY reversed its course following ECB’s hike and YCC Tweak prospects

• EUR/JPY fell to its lowest point since mid-june seeing more than 1.30% losses falling below 154.00.
• ECB hiked by 25 bps, but Christine Lagarde didn’t commit to a hike in September.
• All eyes are now on BoJ’s decision on Friday. Reports suggest that the bank will consider a policy pivot.

The EUR/JPY cross tallied a fourth consecutive day of losses, weakened by Christine Lagarde’s neutral stance following the European Central Bank (ECB) decision to hike rates by 0.25% as expected. The Euro is seeing losses agains most of its rivals, including the JPY, while investors await the Bank of Japan (BoJ) decision early in the Asian session on Friday.

When asked if the bank had more ground to cover, Lagarde stated, “At this point, I wouldn't say so”. In addition, regarding the September decision, she confirmed that it would depend on the economy's evolution and inflation. She also added that the Council would not use forward guidance and would have the choice of raising or maintaining interest rates. 

On the Japanese side, markets await the BoJ to maintain its dovish stance in Friday’s meeting. However, Nikkei reported on Thursday that the bank would consider keeping a rate ceiling but allow moderate rises beyond that level, which gave the JPY a significant boost. In addition, investors will eye the updated macro projections to continue modelling their expectations regarding the bank’s next steps. 

EUR/JPY Levels to watch

According to the daily chart, the technical outlook is bearish. The Relative Strength Index (RSI) fell into negative territory, while the Moving Average Convergence Divergence (MACD) prints higher red bars indicating that the bears are in command. 

Support levels: 153.00, 151.00, 150.00
Resistance levels: 156.00 (20-day Simple Moving Average), 157.00, 157.50. 

EUR/JPY Daily chart