EUR/JPY Price Forecast: Declines below 186.00 amid intervention fears, but bullish vibe prevails

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The EUR/JPY cross trades in negative territory around 185.90 during the early European trading hours on Wednesday. The Japanese Yen (JPY) gathers strength against the Euro (EUR) as traders are on alert for intervention from Japanese officials.

EUR/JPY edges lower to near 185.90 in Wednesday’s early European session.
Japan’s Katayama said the authorities are standing ready to respond appropriately to foreign exchange.
The positive view for the cross remains intact above the key 100-day EMA, with bullish RSI momentum.
The first upside barrier emerges at 186.10; the initial support level to watch is 185.08.

Japan’s Finance Minister Satsuki Katayama said on Wednesday that the authorities are ready to act on the foreign exchange if required, adding that she aligns with the Bank of Japan (BoJ) governor on several matters.

Technical Analysis:

In the daily chart, EUR/JPY holds a constructive bullish bias as price trades above the Bollinger middle band around and comfortably over the 100-day simple moving average (SMA), suggesting the broader uptrend remains intact. The latest Relative Strength Index (RSI) reading at 58.43 sits in positive territory without being overbought, hinting that bullish momentum persists but has not yet reached exhaustion.

On the upside, the immediate resistance level is now aligned with the Bollinger upper band near 186.10, en route to the April 29 high of 187.42. On the other hand, the mid-line around 185.08 reinforcing a nearby demand zone. The next crucial contention level is located near the 100-day SMA at 184.47 and the lower Bollinger band close to 184.07.

(The technical analysis of this story was written with the help of an AI tool.)

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.