EUR/JPY Price Forecast: Holds modest gains above 185.50, bullish bias remains intact

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The EUR/JPY cross posts modest gains around 185.65 during the early European session on Thursday. The potential upside might be limited for the cross amid fears of foreign exchange intervention from Japanese authorities.

EUR/JPY trades with mild gains near 185.65 in Thursday’s early European session.
The croos keep a modest bullish bias above the key 100-day EMA.
The first upside barrier emerges at 186.00; the initial support level is seen at 185.15.

Japan’s Finance Minister Satsuki Katayama said on Wednesday that officials are standing ready to respond appropriately on foreign exchange if required. Katayama added that she aligns with the Bank of Japan (BoJ) governor on several matters.

On the other hand, the hawkish stance of the European Central Bank might help limit the EUR’s losses. The ECB is likely to raise its deposit rate to 2.25% at its upcoming June policy meeting, with another increase likely in September, a Reuters poll of economists showed.

Technical Analysis:

In the daily chart, EUR/JPY trades at 185.64, holding a modest bullish bias as it consolidates above the Bollinger middle band around 185.15 and the 100-day simple moving average (SMA) near 184.48. The pair is trading closer to the upper half of its recent Bollinger envelope, with the upper band near 186.02 acting as immediate overhead resistance, while the Relative Strength Index (14) around 55 suggests steady but not overstretched upside momentum.

On the topside, a daily close above the Bollinger upper band at 186.02 would open the way for a continuation of the advance toward higher highs in the coming sessions. On the downside, initial support is seen at the Bollinger middle band near 185.15, followed by the 100-day SMA at 184.48 and the lower Bollinger band around 184.28, where buyers would be expected to re-emerge if the current pullback deepens.

(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.