EUR/JPY Price Forecast: Softens to near 179.00, bearish bias remains intact below 100-day SMA
- EUR/JPY weakens to near 179.10 in Friday’s early European session.
- BoJ is set to raise interest rates by 25 bps next week.
- The cross keeps a bearish vibe in the near term, with an oversold RSI.
- The first upside barrier emerges at 180.00; the initial support level to watch is 178.42.
The EUR/JPY cross trades in negative territory around 179.10 during the early European session on Friday. The expectation of a Bank of Japan (BoJ) rate hike next week provides some support to the Japanese Yen (JPY) against the Euro (EUR).
Analysts polled by Reuters anticipate the BoJ to raise the interest rate to 1.25% at the September 17-18 meeting, 1.5% by the end of March next year and then to 1.75% in the second quarter (Q2) of 2027. A hike to 1.25% would bring the BoJ's policy rate to levels unseen in 31 years.
The Japanese Yen central bank may signal faster future tightening if price pressures heighten risks of an inflation overshoot, Reuters said. Traders will closely monitor any hints from Governor Kazuo Ueda’s press conference briefing on the pace of future rate hikes and how far the central bank could take rates under the current tightening cycle.
BoJ hawks keep pressure on Yen as markets eye September hike
Strategists at Brown Brothers Harriman highlight that recent commentary from BoJ board member Kazuyuki Masu underscores a clear hawkish bias at the central bank. Masu argued that “to complete the normalization of monetary policy in Japan, I am convinced that the Bank needs to raise the policy interest rate (currently 1.00%) further, so that it falls solidly within the estimated range of the neutral interest rate (1.10% and 2.50%).” Against this backdrop, BBH notes that markets have “virtually fully priced in a 25bps BoJ rate hike to 1.25% on September 18 for several days now,” but adds that “a 50bps move cannot be ruled out given underlying inflation is very close to the 2% target and Japan’s economy is running slightly above capacity.”
Technical Analysis: EUR/JPY retains a negative outlook under the 100-day SMA
In the daily chart, EUR/JPY extends a bearish near-term bias as spot holds well beneath the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA). The pair is sliding along the lower half of the Bollinger envelope, with the lower band acting as the nearest volatility floor, while the Relative Strength Index (14) around 28 suggests oversold conditions that could slow, but not yet reverse, the downside pressure.
On the topside, initial resistance emerges at the 180.00 psychologocal level. Further north, the next hurdle to watch is the 20-day Bollinger SMA near 183.35, ahead of the 100-day SMA at 184.55. The Bollinger upper band up at 188.90 marking a more distant cap if a corrective rebound gathers traction.
On the downside, the September 10 low of 178.42 acts as an initial support level for the cross, followed by the Bollinger lower band around 177.80. A clear break beneath this level would expose the November 5 low, 2025 of 175.70.
(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.