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EUR/JPY Price Forecast: Holds gains above 176.50, but downside bias prevails below 100-day SMA
- EUR/JPY trades with mild gains near 176.65 in Monday’s early Asian session.
- BoJ meeting minutes indicated policymakers are prepared to accelerate monetary tightening.
- The negative outlook of the cross remains intact below the 100-day SMA, with bearish RSI momentum.
- The immediate resistance level emerges at 176.80; the initial support level to watch is 175.70.
The EUR/JPY cross trades in positive territory around 176.65 during the early European trading hours on Monday. However, the potential upside for the cross might be limited amid hawkish signals from the Bank of Japan (BoJ).
The BoJ left rates unchanged last month but emphasized its resolve to combat inflationary risk, reinforcing market expectations of a December rate hike. According to the BoJ minutes of the September meeting released on Thursday, most of the policymakers agreed that further interest rate increases would be appropriate as underlying inflation approached the central bank's 2% target.
On Friday, BoJ former top economist Seisaku Kameda said that the central bank is expected to raise interest rates in December and keep lifting borrowing costs next year until they reach 2% to combat mounting inflationary pressure.
Yen stands out as ai volatility undermines Dollar’s safe-haven appeal
Analysts at OCBC highlight that the Japanese Yen has been the clear outperformer in recent trading, noting that “the standout has been the JPY.” They argue that its recent strength “reinforces its value as a hedge against a reversal in the US-centric AI trade,” even if “it is probably too early to expect sustained JPY gains purely on AI concerns.” Looking ahead, OCBC suggests that “more frequent US-centric AI volatility in 2027 could strengthen its hedge appeal,” particularly as the “AI sell-off is creating competing forces for the USD.” In their view, “falling US yields are blunting the USD’s safe-haven appeal, leaving the JPY as the standout hedge against more US-centric volatility.”
Beyond the AI theme, OCBC also points to domestic Japanese flows as a potential additional driver. They flag “Japanese portfolio rebalancing” as “the other potential JPY catalyst,” with the market set to scrutinize “GPIF’s July-September results for signs of a shift towards domestic assets.” OCBC notes that “if GPIF and other Japanese investors bring more money home or increase FX hedging on overseas assets, an important source of structural JPY selling could fade,” meaning that “GPIF flows could provide another tailwind for the JPY.”
Technical Analysis: EUR/JPY remains capped under the 100-day SMA
In the daily chart, EUR/JPY maintains a bearish near-term tone as spot holds beneath the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ middle line. Price action is contained in the lower half of the Bollinger envelope, with the lower band acting as the immediate downside reference, while a Relative Strength Index (RSI) reading of 44.39 suggests subdued momentum rather than outright oversold conditions.
On the topside, initial resistance is located at the Bollinger middle band near 176.80, followed by the upper boundary of Bollinger band around 178.30. Any follow-through buying above this level could pave the way to the 180.00 psychological level, en route to the 100-day SMA at 181.50.
On the downside, the November 2 low of 175.70 acts as an initial support level for the cross, followed by the lower limit of Bollinger band at 175.30. A decisive break below this level would likely open the door to the October 6, 2025 low of 174.74.
(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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