EUR/JPY Price Forecast: Falls below 176.00 after a bullish gap opening
- EUR/JPY may test the 12-month low of 175.10.
- The 14-day Relative Strength Index near 33 signals lingering weak momentum.
- The primary barrier lies at the nine-day EMA of 176.69.
EUR/JPY gains ground after three days of losses, trading around 175.90 during Asian hours on Monday. Technical analysis of the daily chart shows the currency cross remains within a descending channel pattern, indicating a persistent bearish bias.
The EUR/JPY cross is keeping a bearish near-term tone as it holds below both the nine- and 50-period Exponential Moving Averages (EMAs). The alignment of the shorter EMA under the longer one, with price still capped beneath them, suggests upside attempts remain constrained, while the 14-day Relative Strength Index (RSI) around 33 hints at lingering weak momentum rather than outright oversold conditions.
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 175.00. 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 176.69, followed by the upper boundary of the descending channel near 178.60. Further resistance lies at the 50-day EMA of 179.38. 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.
Yen firms as risk-off tone persists and Japan inflation tops BoJ target
Analysts at MUFG highlight that the Yen “has continued to trade at stronger levels at the end of this week encouraged by more risk-off trading conditions.” They note that USD/JPY “fell to a low overnight of 156.08 but has since risen back up towards the 157.00-level as the sell-off in Asian equity markets reversed,” underscoring the currency’s defensive bid amid shifting risk sentiment.
Complementing the market moves, Deutsche Bank points out that “in Japan, September inflation rose as expected overnight, with core CPI accelerating to a nine-month high of +2.1% y/y and moving above the BoJ’s target, supported by higher energy costs and yen weakness.” Together, the firmer Yen and above-target core CPI reinforce the picture of a market balancing risk-off flows with evolving domestic price dynamics.
(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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