On Thursday (September 11), the euro rebounded against the yen after two consecutive declines. The exchange rate rose 0.26% during the European trading session, trading around 172.89.

Japan's producer price index (PPI) rose slightly in August, which, together with an upward revision to second-quarter GDP data, increased household spending and rising real wages, provided support for an upcoming interest rate hike by the Bank of Japan.

But traders seem reluctant to make big bets, choosing to wait for the release of more data.

At the same time, the domestic political turmoil caused by the resignation of Japanese Prime Minister Shigeru Ishiba continues to ferment. Bank of Japan officials are inclined to keep their stance on hold at next week's monetary policy meeting, maintaining the current interest rate level of 0.5%, and will only initiate policy adjustments after clearer signals of continued wage-driven inflationary pressure emerge.

Market pricing has fully reflected this cautious stance. The different interest rate policies preferred by Japanese prime ministerial candidates also provide continuous disturbances to Japan's political situation. At the same time, the French confidence vote ended on Tuesday, and the old Prime Minister Bayrou stepped down. Ultimately, Macron needs to find a new prime minister. The European political disturbance has come to an end for the time being. After eliminating the French crisis, the euro is expected to continue to remain strong against the yen. Japanese importers can prepare to exchange currency to prevent the euro from appreciating.

Yen bulls remain on the sidelines despite positive fundamental backdrop

A report released by the Bank of Japan on Thursday showed that Japan's producer price index (PPI) rose 2.7% year-on-year in August, a slight increase from 2.6% in the previous month. On a month-on-month basis, the PPI fell slightly by 0.2%, reversing the 0.2% increase in July.

Earlier, a short-term survey released by foreign media on Wednesday showed that Japanese manufacturers' confidence reached its best level in more than three years in September. In addition, revised GDP data released by Japan earlier this week showed that Japan's economic growth rate in the second quarter of 2025 was 2.2% annualized.

Other recent data showed an increase in household spending and real wages turning positive for the first time in seven months, keeping alive the possibility of a Bank of Japan rate hike before the end of the year, which continued to support the yen in Asian trading on Thursday.

In contrast, an unexpected decline in U.S. inflation supported market bets that the Federal Reserve will cut interest rates at its policy meeting next week. The U.S. Bureau of Labor Statistics (BLS) reported on Wednesday that the U.S. Producer Price Index (PPI) fell to 2.6% year-on-year in August from 3.3% in July.

Other details in the report showed that the core PPI, which excludes food and energy prices, rose 2.8% year-on-year, a sharp slowdown from 3.7% in July and well below the market consensus of 3.5%. The data boosted market bets on more aggressive policy easing by the Federal Reserve.

Risk appetite has improved, but the extent of improvement still needs to be monitored with attention to the US CPI data.

The French confidence vote ultimately received 194 votes in favor and 364 against. According to the laws governing such confidence votes, the Bayrou-led government received fewer votes in favor than against, failing the confidence vote. Emmanuel Macron will now need to find a new prime minister, and the French crisis has been temporarily resolved.

The market has almost fully digested the expectation of three US interest rate cuts in the rest of the year, and believes that there is a small but real possibility that the Federal Reserve will implement a large interest rate cut of 50 basis points at its meeting on September 16-17.

However, despite these positive factors, traders seem reluctant to make large bets, opting instead to await the release of the US Consumer Price Index (CPI) report at 8:30 PM during North American trading hours. This key inflation data will play a key role in driving the US dollar and provide important guidance for the overall risk appetite in the market.

Technical Analysis:

The 14-day Relative Strength Index (RSI) remains above the 50 mark, indicating a bullish outlook. The main support level is seen at the 9-day exponential moving average (EMA) at 172.63.

From the technical analysis of the daily chart, the currency pair is still in the ascending channel pattern and the market bullish trend continues.

The 14-day Relative Strength Index (RSI) is above the 50 mark, reflecting bullish market sentiment. Furthermore, EUR/JPY has strengthened its short-term price momentum by breaking above its 9-day exponential moving average (EMA).

On the upside, the primary resistance is the psychological level of 173.00. A successful break above this level could push EUR/JPY towards its highest level since July 2024, around 173.91, reached on September 8th. This would then challenge the upper band of the ascending channel at around 174.10. A further break above the upper band would strengthen the bullish outlook and could potentially push the pair towards its all-time high of 175.43 reached in July 2024.

EUR/JPY may first test short-term support at the 9-day exponential moving average (EMA) at 172.63, followed by support at the lower boundary of the ascending channel around 171.80. A break below this key support range would weaken the bullish outlook and could lead to a test of the 50-day exponential moving average (EMA) at 171.28.

If the decline continues to extend, medium-term price momentum will be damaged and downward pressure will push the currency pair towards the 10-week low around 169.72 recorded on July 31.


(Euro/yen daily chart, source: Yihuitong)

At 19:44 Beijing time, the euro was trading at 172.87/86 against the yen.