EUR/JPY Price Forecast: Remains bullish above 173.00, overbought RSI warrants caution for bulls
- EUR/JPY gathers strength to near 173.10 in Wednesday’s Asian session.
- The positive bias of the cross prevails above the 100-day EMA, but the overbought RSI condition might cap its upside.
- The first upside target emerges at 173.50; the initial support level to watch is 170.95.
The EUR/JPY cross gains momentum to around 173.10 during the Asian trading hours on Wednesday. The Japanese Yen (JPY) softens against the Euro (EUR) as traders reduce bets for an immediate interest rate hike by the Bank of Japan (BoJ) due to concerns over the economic fallout from higher US tariffs.
According to the daily chart, the constructive outlook of EUR/JPY remains intact as the cross holds above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) stands above the midline near 75.45, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term EUR/JPY appreciation.
The upper boundary of the Bollinger Band at 173.50 acts as an immediate resistance level for the cross. A decisive break above this level could see a rally to 174.52, the high of July 3, 2024. Further north, the next hurdle is seen at 175.43, the high of July 11, 2024.
On the flip side, the initial support level for EUR/JPY is located at 170.95, the low of July 10. A breach of this level could expose the 170.00 psychological level. The next contention level to watch is 169.04, the low of July 2.
EUR/JPY daily chart
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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