The EUR/JPY cross trades in negative territory near 185.00 during the early European session on Thursday. Traders might turn cautious ahead of the European Central Bank (ECB) interest rate decision later in the day. The ECB is widely expected to leave its key interest rates unchanged at its first policy meeting of 2026. This would mark the fifth consecutive meeting without a rate change.
Traders will keep an eye on the ECB’s President Christine Lagarde’s press conference for more clues about the interest rate outlook over the coming months. Analysts see the rates staying there through the end of next year, with the probability of a hike in 2026 declining, according to Bloomberg.
On the other hand, fiscal and political woes in Japan might weigh on the Japanese Yen (JPY) and create a tailwind for the cross. Takaichi’s ruling Liberal Democratic Party (LDP) is expected to gain more seats in the national election on Sunday as she seeks voter backing for increased spending, tax cuts and a new security strategy. Her expansionary fiscal policies raise concerns about Japan’s fiscal outlook due to fears of debt-funded spending.
Technical Analysis:
In the daily chart, EUR/JPY holds above the 100-day EMA, keeping the medium-term uptrend intact and leaving a cushion beneath spot. Price hovers near the upper Bollinger Band, signaling sustained bullish pressure as the bands edge wider. RSI at 57.50 remains in positive territory, confirming the bias. Immediate support stands at the 20-day mid-band at 184.25, while the upper band at 186.00 caps the immediate topside.
A daily close above the upper band could invite a band-walk higher, whereas a rejection would favor consolidation above the mid-band. Below there, the 100-day EMA at 180.32 is secondary support that would need to give way to threaten the broader advance.
(The technical analysis of this story was written with the help of an AI tool.)
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.