EUR/JPY Price Forecast: Strengthens above 176.50, yet maintains bearish bias below 100-day SMA
- EUR/JPY posts modest gains near 176.85 in Friday’s early Asian session.
- The negative tone of the cross remains intact below the 100-day SMA, with bearish RSI momentum.
- The first upside barrier emerges at 178.25; the initial support level is seen at 176.16.
The EUR/JPY cross trades in positive territory around 176.85 during the early European session on Friday. Traders remain on high alert for currency intervention from Japanese authorities to prop up the Japanese Yen (JPY).
Japanese Finance Minister Satsuki Katayama said on Friday that the officials are observing one-sided, swift foreign exchange shifts recently. Katayama added that the government will respond appropriately to currency volatility and will engage with the US Treasury.
Bank of Japan (BoJ) board member Toichiro Asada said on Thursday that the central bank must be mindful of the risk that rate hikes could push down underlying inflation given consumption lacks momentum.
On the Euro’s front, the European Central Bank (ECB) is expected to deliver a final deposit rate hike in this cycle next month, according to most economists polled by Reuters, although more than a third expect an additional rate increase in early 2027 as inflation hits double the 2% target.
Japan JGB demand builds as BoJ credibility lifts medium-term Yen outlook
Analysts at MUFG/BTMU highlight that “there continue to be signs that confidence in the JGB market has improved,” a shift they attribute in part to “the more active BoJ and the general consensus that within one or two hikes, the BoJ would be at the neutral policy rate.” According to the bank, Ministry of Finance data “confirming this pick-up in JGB buying by Japanese households” show a notable rise in issuance targeted at individuals. The MoF, which “has an entire portion of its website dedicated to JGBs for individuals,” reports that issuance in November for 3-, 5- and 10-year paper totalled “JPY 2,026bn, the largest single-month total.”
MUFG/BTMU also points to “growing speculation that the government will soon make changes to incentivise JGB buying by including individual JGB holdings in tax-free NISA accounts and/or removing these holdings from inheritance tax,” which could further bolster retail demand. The bank sees “early signs of a shift in flows perhaps,” and argues that “the more examples of this we start to see the more compelling the case will become of a more sustained turnaround in the multi-year trend of yen weakness.” With “intervention likely halting the prospects to the upside, and confidence in the BoJ improving,” MUFG/BTMU concludes that “the risks certainly look more skewed to yen strength over the medium term.”
BoJ’s Asada tempers hike expectations but keeps gradual tightening on the table for Dollar/Yen
BoJ’s Asada speech scores 4.4/10 on FXS Speechtracker, modestly above the historic 3.8/10 baseline, signaling a slightly more impactful and cautiously hawkish tone. Emphasis on being “mindful” that rate hikes could dampen underlying inflation amid weak consumption, and the lack of a clear terminal rate, underscore a reluctance to rush tightening, while stressing Central Bank independence and the possibility of both future hikes and cuts keeps policy optionality wide open.
Comments that Japan’s nominal neutral rate may sit somewhat above the current policy rate, that Asada is “not against raising rates altogether,” and that rates may need to rise slowly at some stage collectively lean hawkish relative to past communication. For Dollar/Yen, the refusal to discuss a desirable FX level, combined with a preference for gradual, data-dependent moves, suggests limited near-term upside in rate expectations but preserves a medium-term bias toward incremental normalization, tempering aggressive Yen-bullish narratives while capping extreme Dollar strength.
Technical Analysis: EUR/JPY keeps a bearish vibe under the 100-day SMA
In the daily chart, EUR/JPY maintains a bearish near-term tone as it holds below the 100-day simple moving average (SMA) while only marginally above the Bollinger middle band. The pair is pressing the lower half of the Bollinger envelope, and the Relative Strength Index (RSI) at 46 suggests subdued, slightly negative momentum rather than an oversold condition, hinting that sellers remain in control but without extreme pressure.
On the topside, initial resistance emerges at the upper boundary of Bollinger Band near 178.25, en route to the 180.00 psychological level. A desicive break above this level could pave the way to the more significant 100-day SMA barrier at 181.25, which continues to cap recovery attempts.
On the downside, immediate support level is aligned with the November 6 low of 176.16, followed by the lower limit of Bollinger Band region near 175.35. A breach of the mentioned level could expose the October 2, 2025 low of 172.27.
(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.