EUR/JPY Price Forecast: Rises above 176.50 but bearish bias persists below 100-day SMA

• Around 176.85, EUR/JPY edges higher during early Asian trading on Friday.
• Below the 100-day SMA, the cross retains its bearish bias as RSI momentum remains negative.
• Resistance initially stands at 178.25, while 176.16 provides the first support.

At around 176.85, EUR/JPY is slightly higher in Friday’s early European trading. Market participants remain alert to possible intervention by Japanese authorities to support the Japanese Yen (JPY).

Recent foreign exchange moves have been rapid and one-sided, Japanese Finance Minister Satsuki Katayama said on Friday. She added that the government would respond appropriately to currency volatility and engage with the US Treasury.

With consumption lacking momentum, the Bank of Japan (BoJ) must take account of the risk that interest rate increases could depress underlying inflation, board member Toichiro Asada said on Thursday.

For the Euro, most economists surveyed by Reuters expect the European Central Bank (ECB) to make its final deposit rate increase of this cycle next month. However, with inflation reaching double the 2% target, more than a third anticipate a further rise in early 2027.

JGB demand strengthens as greater BoJ confidence supports the Yen’s medium-term outlook

Improving confidence in Japanese government bonds is drawing attention from MUFG/BTMU analysts, who note that “there continue to be signs that confidence in the JGB market has improved,” partly reflecting “the more active BoJ and the general consensus that within one or two hikes, the BoJ would be at the neutral policy rate.” The bank cites Ministry of Finance figures “confirming this pick-up in JGB buying by Japanese households” as evidence of a marked increase in issuance aimed at individuals. According to the MoF, which “has an entire portion of its website dedicated to JGBs for individuals,” November issuance of 3-, 5- and 10-year bonds reached “JPY 2,026bn, the largest single-month total.”

Retail demand could receive a further boost from what MUFG/BTMU describes as “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,”. Identifying “early signs of a shift in flows perhaps,” the bank 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.” Against a backdrop of “intervention likely halting the prospects to the upside, and confidence in the BoJ improving,” its conclusion is that “the risks certainly look more skewed to yen strength over the medium term.”

BoJ’s Asada restrains rate rise expectations while leaving gradual tightening in play for Dollar/Yen

A score of 4.4/10 on FXS Speechtracker places BoJ’s Asada speech modestly above the historical baseline of 3.8/10, indicating a slightly more consequential, cautiously hawkish message. His emphasis on remaining “mindful” of the risk that rate rises could weaken underlying inflation when consumption is subdued, alongside the absence of a clear terminal rate, points to an unwillingness to tighten hastily. At the same time, his stress on central bank independence and the scope for future rate increases or cuts leaves considerable policy flexibility.

Compared with earlier communication, a cautiously hawkish tilt emerges from Asada’s suggestions that Japan’s nominal neutral rate may be somewhat higher than the current policy rate, that he is “not against raising rates altogether,” and that rates may eventually need to increase slowly. For Dollar/Yen, his unwillingness to specify a desirable exchange rate, together with a preference for gradual moves guided by incoming data, implies little scope for a near-term rise in rate expectations. Nevertheless, a medium-term inclination towards incremental normalisation remains, moderating strongly Yen-bullish interpretations while limiting extreme Dollar strength.

Technical Analysis: EUR/JPY remains under pressure below the 100-day SMA

Trading below its 100-day simple moving average (SMA) and only just above the Bollinger middle band, EUR/JPY retains a bearish short-term bias on the daily chart. Pressure remains concentrated in the lower half of the Bollinger envelope. At 46, the Relative Strength Index (RSI) indicates muted, mildly negative momentum rather than oversold conditions, suggesting sellers still have the upper hand without exerting extreme pressure.

Any recovery would first encounter resistance at the upper boundary of the  Bollinger Band around 178.25, ahead of the psychological 180.00 mark. A decisive move through the latter could open the way towards the more substantial 100-day SMA resistance at 181.25, which continues to constrain recovery attempts.

If the cross weakens, the 6 November low at 176.16 offers immediate support before the lower Bollinger Band area around 175.35. A break beneath that level could bring the 2 October 2025 low of 172.27 into view. 

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