EUR/JPY Price Forecast: Softens below 182.00 on intervention risks, bearish outlook prevails
- EUR/JPY declines to near 181.70 in Wednesday’s early European session.
- The cross keeps a negative tone, with bearish RSI momentum.
- The first upside barrier emerges at 184.90, the initial support level to watch is 181.15.
The EUR/JPY cross trades in negative territory around 181.70 during the early European trading hours on Wednesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) as traders remain on alerts for further intervention from Japanese authorities following the coordinated intervention between the United States (US) and Japan.
Traders will closely monitor the developments surrounding US-Iran talks. Axios reported that the US, Iran, and Oman are closing in on an interim deal to reopen the Strait of Hormuz, with Washington aiming for a Wednesday announcement.
The source added that the agreement under discussion sets up a 60-day temporary arrangement between Oman and Iran in the critical waterway. Fresh optimism over the Middle East could improve risk sentiment and provide some support to the riskier asset, such as the EUR against the JPY.
Yen outlook seen hinging on growth rather than faster BoJ hikes
Societe Generale argues that the policy rate path alone is unlikely to deliver a sustained recovery in the Yen. Analysts there stress that “more, or faster BoJ rate hikes won’t solve the problem either, unless the Japanese growth outlook makes them appear realistic,” underscoring their view that a credible improvement in Japan’s growth prospects is a prerequisite for any meaningful policy tightening to support the currency.
Technical Analysis: Negative outlook of EUR/JPY remains intact
In the daily chart, EUR/JPY keeps a bearish near-term tone as spot holds below the 20-day simple moving average (SMA) from the Bollinger Bands and the 100-day SMA, which now act as a tight resistance cluster overhead. Price is sliding toward the lower Bollinger Band while the Relative Strength Index (14) at 34.77 stays close to oversold territory, hinting that downside pressure persists but may be approaching a fatigue zone.
On the topside, initial resistance is aligned at the Bollinger mid-line/20-day SMA near 184.90, followed by the 100-day SMA at 185.10. A decisive daily close above this level would be needed to ease the current downside bias, with the upper Bollinger Band up at 188.65 as a more distant barrier.
On the downside, the lower Bollinger Band around 181.15 offers the first notable support, and a clear break beneath it would expose the February 12 low of 180.81, en route to the 180.00 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
What key factors drive the Japanese Yen?
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.
How do the decisions of the Bank of Japan impact the Japanese Yen?
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.
How does the differential between Japanese and US bond yields impact the Japanese 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.
How does broader risk sentiment impact the Japanese Yen?
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.