EUR/JPY Price Forecast: Positive view prevails above 170.50, Eurozone Retail Sales data in focus
- EUR/JPY weakens to around 170.70 in Wednesday’s early European session.
- The positive view of the cross prevails above the key 100-day EMA, but further consolidation looks favorable.
- The immediate resistance level emerges at 172.35; the first support level to watch is 170.15.
The EUR/JPY cross attracts some sellers near 170.70 during the early European session on Wednesday. The Japanese Yen (JPY) edges higher against the Euro (EUR) as the Bank of Japan (BoJ) revised its inflation forecast at the end of the July meeting and left the door open for further interest rate hikes by the end of this year. The release of the Eurozone Retail Sales data for June will be the highlight later on Wednesday.
According to the daily chart, the constructive outlook of EUR/JPY remains in place as the cross is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline. This displays a neutral momentum in the near term.
On the bright side, the first upside barrier emerges at 172.35, the high of July 31. Sustained trading above this level could pick up more momentum and aim for 173.65, the upper boundary of the Bollinger Band. Further north, the next resistance level is seen in the 173.90-174.00 zone, representing the high of July 28 and the psychological level.
In the bearish case, the lower limit of the Bollinger Band of 170.15 acts as an initial support level for EUR/JPY. The crucial contention level to watch is the 170.00 round mark. A breach of this level could drag the cross toward 168.10, the low of June 25.
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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