EUR/JPY price forecast: What next as pair stays above 176.50 near nine-day EMA?

Immediate support at 176.45, the nine-day EMA, may come under pressure from EUR/JPY.
Modest downward momentum is indicated by the 14-day Relative Strength Index reading of 44.16.
Near 177.90, the upper edge of the descending channel presents the main resistance.

A bearish bias continues to shape EUR/JPY, which trades marginally lower around 176.70 in Tuesday’s Asian session after modest gains the day before. On the daily chart, the cross remains inside a descending channel, reinforcing the prevailing negative outlook.

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With the 50-period Exponential Moving Average (EMA) still limiting gains, EUR/JPY holds just above its nine-period EMA. Trading below the longer-term EMA points to a mildly bearish tone. Meanwhile, a 14-day Relative Strength Index (RSI) reading of 44.16 remains in neutral territory, signalling limited downward momentum rather than strong selling pressure.

At 176.45, the nine-day EMA provides the immediate support being tested by EUR/JPY. Below this, the next level is the 12-month low of 175.07 recorded on 30 October, followed by the descending channel’s lower edge around 174.30. Should the cross break below the channel, the area near the 15-month low of 169.72 would come into view.

A move higher could take EUR/JPY towards the descending channel’s upper edge near 177.90, with the 50-day EMA at 178.72 next in line. Clearing that medium-term moving average would trigger a bullish reversal and support a move towards the region of the all-time high of 187.95, recorded on 17 April.

EUR/JPY: What does the daily chart signal?

Can the Euro overcome Europe’s fiscal and energy headwinds?

A loss of momentum in the Dollar does not, by itself, make the Euro an attractive alternative, warn analysts at DBS Group Research. They point out that “Europe’s fiscal and political uncertainties, particularly in France, and its vulnerability to elevated energy prices complicate the search for viable alternatives.” In their view, these combined risks constrain investors’ confidence in shifting from the Dollar into Eurozone assets, notwithstanding recent currency movements.

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

Euro: Frequently asked questions

Which countries use the Euro, and how widely is it traded?

Only the US Dollar is traded more actively worldwide than the Euro, the shared currency of the 20 European Union countries within the Eurozone. During 2022, the Euro featured in 31% of all foreign exchange transactions, generating average daily turnover above $2.2 trillion. With an estimated 30% of all transactions, EUR/USD is the world’s most actively traded currency pair. It is followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

How does the ECB shape the Euro’s performance?

Interest rates and monetary policy across the Eurozone are managed by its reserve bank, the European Central Bank (ECB), based in Frankfurt, Germany. Maintaining price stability is the ECB’s central mandate, requiring it either to contain inflation or to stimulate growth. Raising and lowering interest rates is its main policy instrument. Higher relative interest rates, or expectations of an increase, generally support the Euro; the reverse also applies. Monetary policy is decided by the ECB Governing Council at eight meetings each year. The decision-makers comprise the heads of the Eurozone’s national banks and six permanent members, among them ECB President Christine Lagarde.

Why do inflation readings matter for the Euro?

An important economic measure for the Euro is Eurozone inflation, tracked through the Harmonised Index of Consumer Prices (HICP). An inflation reading above expectations, particularly one exceeding the ECB’s 2% target, requires the central bank to increase interest rates to regain control of prices. When interest rates are relatively higher than those elsewhere, the Euro usually benefits because the region becomes a more attractive destination for global investors’ funds.

Which economic indicators affect the Euro’s direction?

The Euro can react to economic releases because they reveal the economy’s underlying health. GDP, Manufacturing and Services PMIs, employment figures and consumer sentiment surveys are among the indicators that can steer the single currency. Economic strength supports the Euro by drawing in more foreign investment and potentially prompting the ECB to raise interest rates, which would directly strengthen the currency. Weak economic readings, by contrast, are likely to weigh on the Euro. Particular attention is paid to data from Germany, France, Italy and Spain. As the euro area’s four largest economies, they represent 75% of the Eurozone economy.

Why is the Trade Balance important for the Euro?

The Trade Balance is another key economic release for the Euro, showing the gap between a country’s export earnings and its import spending over a specified period. Strong overseas demand for a country’s exports creates additional demand for its currency as foreign buyers seek to purchase those goods, lifting the currency’s value. A positive net Trade Balance therefore supports a currency, while a negative balance has the opposite effect.