EUR/JPY Price Forecast: Holds steady below 177.50, bearish technicals reinforce downside bias
- EUR/JPY flatlines near 177.30 in Friday’s early European session.
- BoJ’s Koeda says the central bank should not become overly cautious about raising interest rates.
- The cross maintains a negative tone below the 100-day SMA, with bearish RSI momentum.
- The first upside barrier emerges at 178.20; the initial support level to watch is 175.65.
The EUR/JPY cross trades on a flat note around 177.30 during the early European trading hours on Friday. Traders remain on high alert for currency intervention from Japanese authorities to prop up the Japanese Yen (JPY).
Furthermore, hawkish comments from a Bank of Japan (BoJ) policymaker could provide some support to the JPY and act as a headwind for the cross. BoJ policy board member Junko Koeda said that there is no need to be excessively cautious about rate hikes given that upside inflation risks remain substantial.
Koeda further stated that the Japanese central bank should adjust its policy rate in a timely manner while keeping in mind the estimated range of the neutral interest rate.
On the Euro front, Citi analysts believe French debt concerns could prompt the European Central Bank (ECB) to pause interest rate hikes after December, or earlier if financial stress spreads across the Eurozone. The ECB is likely to leave its deposit rate unchanged at 2.50% in October but raise it by 25 basis points (bps) in December as inflation runs nearly double its 2% target, according to a Reuters poll.
Japan flows highlight shifting confidence in JGBs and rising Yen headwinds from NISA-driven foreign equity buying
Analysts at MUFG note that September was “a month of turmoil in global bond markets,” reflected in “the selling of foreign bonds by Japanese investors.” In contrast, they highlight that “foreign investors did not show the same aversion to fixed income” and instead recorded “a notable JPY 3,091bn worth of purchases of Japanese bonds.” With September also marking another BoJ rate increase, MUFG suggests this inflow “could be indicative of improved confidence in JGBs after three consecutive months of selling through to August.”
The bank also points to Japan Investment Trust data as “telling,” with “foreign equity purchases totalling JPY 1,360bn in September.” MUFG stresses that “the buying has picked up,” noting that “the 3mth sum of foreign equity purchases totalled JPY 3,949bn, a new record over a 3mth period.” They emphasise that this Investment Trust flow “captures households buying of foreign securities via NISA accounts” and that “the expanded NISA limits adopted in January 2024 continues to have a notable impact.” MUFG calculates that “annualising this 3mth flow implies an outflow of close to JPY 16trn (USD 100bn) and is an increasing negative yen factor.”
Looking ahead, MUFG argues that “providing tax-free opportunities to hold JGBs could well have an impact on the flows to foreign equity markets that is so evident today and given the scale of foreign equity purchases currently would be viewed as a clear yen positive.” Such a move “would be one policy initiative that would help the government reach a target of 40% of household financial assets being invested in domestic securities.” At present, MUFG notes that “nearly half of all household savings are parked in cash deposits and large portions of pensions and investment trusts are invested in foreign securities,” underscoring the potential for policy tweaks to redirect savings back toward domestic markets.
Technical Analysis: Negative outlookf of EUR/JPY remains intact below the 100-day SMA
In the daily chart, EUR/JPY keeps a bearish near-term bias as spot holds beneath the 20-day Bollinger simple moving average (SMA) and well below the 100-day moving average. Price action sits in the lower half of the Bollinger envelope, while the Relative Strength Index (14) around 39 suggests subdued upside momentum and favors continued downside pressure unless resistance levels above are reclaimed.
On the topside, initial resistance level emerges at the 20-day Bollinger SMA near 178.20, en route to the 180.00 psychological level. Sustained trading above this level could pave the way to the upper boundary of Bollinger band at 180.75, with a more significant barrier at the 100-day moving average around 182.90.
On the downside, the lower limit of Bollinger band at 175.65 offers the next notable support. A clear break below this floor would open the door toward the October 20 low, 2025 of 175.34, followed by the October 2, 2025 low of 172.27.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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