EUR/JPY Price Forecast: Holds above 176.00 despite bearish bias
- EUR/JPY may fall toward the 12-month low of 175.10.
- The 14-day Relative Strength Index near 35.98 signals subdued upside momentum rather than an oversold state.
- The primary barrier lies at the nine-day EMA of 176.60.
EUR/JPY remains stronger for the second successive day, trading around 176.20 during Asian hours on Tuesday. Based on the technical analysis of the daily chart's descending channel pattern, the currency cross maintains a clear bearish bias.
The EUR/JPY cross is maintaining a bearish bias as it holds beneath both the nine- and 50-day Exponential Moving Averages (EMAs). The short- and medium-term averages above price suggest rallies remain capped, while the 14-day Relative Strength Index (RSI) at 35.98 stays in weak territory, hinting at subdued upside momentum rather than an outright oversold condition.
The EUR/JPY cross may test the 12-month low of 175.10, reached on October 23, followed by the lower boundary of its descending channel around 174.80. Further declines below this confluence support zone would open the door for the currency cross to navigate the region around the 15-month low at 169.72.
On the upside, the primary barrier lies at the nine-day EMA of 176.60, followed by the upper boundary of the descending channel near 178.50. Further resistance lies at the 50-day EMA of 179.26. A move above the medium-term price average would cause a bullish reversal, supporting the EUR/JPY cross to explore the area around the all-time high of 187.95, reached on April 17.
BoJ seen on hold at 1.25% as market waits on next tightening step
Brown Brothers Harriman’s Elias Haddad notes that the Bank of Japan is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again,” underscoring market expectations that policymakers will pause to evaluate the impact of the recent move before considering any further adjustment to the policy rate.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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