EUR/JPY Price Forecast: Why does a downside bias persist below the 100-day SMA despite gains holding above 176.50?

Modest buying keeps EUR/JPY near 176.65 during early Asian trading on Monday.
Minutes from the BoJ meeting signalled policymakers’ readiness to quicken the pace of monetary tightening.
Below the 100-day SMA, the cross retains a bearish outlook, reinforced by negative RSI momentum.
Resistance lies immediately at 176.80, while 175.70 is the first support level in focus.

Modest gains place EUR/JPY around 176.65 in Monday’s early European session, though hawkish signals from the Bank of Japan (BoJ) may restrict further upside in the cross.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Expectations of a December rate increase strengthened after the BoJ kept rates steady last month while stressing its determination to address inflation risks. Minutes of the September meeting, published on Thursday, showed that most policymakers considered further interest rate rises appropriate as underlying inflation moved towards the central bank’s 2% target.

Speaking on Friday, former BoJ top economist Seisaku Kameda said the central bank was expected to increase interest rates in December and continue raising borrowing costs next year until they reach 2%, in an effort to tackle growing inflationary pressure.

Can the Yen retain its edge as AI volatility weakens the Dollar’s safe-haven appeal?

Recent trading has left the Japanese Yen clearly ahead of its peers, according to OCBC analysts, who observe that “the standout has been the JPY.” They say the currency’s strength “reinforces its value as a hedge against a reversal in the US-centric AI trade,” while cautioning that “it is probably too early to expect sustained JPY gains purely on AI concerns.” For the period ahead, OCBC argues that “more frequent US-centric AI volatility in 2027 could strengthen its hedge appeal,” especially since the “AI sell-off is creating competing forces for the USD.” The analysts’ assessment is that “falling US yields are blunting the USD’s safe-haven appeal, leaving the JPY as the standout hedge against more US-centric volatility.”

Domestic investment flows in Japan could offer a further source of support beyond the AI theme, OCBC says. The analysts identify “Japanese portfolio rebalancing” as “the other potential JPY catalyst,” as markets prepare to examine “GPIF’s July-September results for signs of a shift towards domestic assets.” Their view is that “if GPIF and other Japanese investors bring more money home or increase FX hedging on overseas assets, an important source of structural JPY selling could fade,” implying that “GPIF flows could provide another tailwind for the JPY.”

Technical Analysis: Can EUR/JPY Break Above the 100-day SMA?

Trading below both the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ midline keeps the near-term bias bearish for EUR/JPY on the daily chart. The cross remains within the lower half of the Bollinger envelope, making the lower band the immediate downside reference. Meanwhile, the Relative Strength Index (RSI) at 44.39 points to weak momentum, rather than outright oversold conditions.

A recovery would first encounter resistance near 176.80 at the middle Bollinger band, with the upper band around 178.30 providing the next hurdle. Sustained buying beyond that level could bring the psychological 180.00 mark into view, ahead of the 100-day SMA at 181.50.

Initial downside support comes from the 2 November low at 175.70, ahead of the lower Bollinger band at 175.30. If that level gives way decisively, the cross would likely have room to retreat towards 174.74, the low recorded on 6 October 2025.

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

Japanese Yen: Frequently Asked Questions

Which factors influence the Japanese Yen most?

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. On occasion, the BoJ has intervened directly in currency markets, usually to weaken the Yen. However, political concerns among Japan’s main trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary stance weakened the Yen against its major currency peers as its policy increasingly diverged from that of other leading central banks. The gradual withdrawal of this ultra-loose policy has, more recently, offered the Yen some support.

Why does the gap between Japanese and US bond yields affect the Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved increasingly out of step with other central banks, especially the US Federal Reserve. This helped widen the yield gap between 10-year US and Japanese bonds, benefiting the US Dollar relative to the Japanese Yen. That differential is now narrowing as the BoJ’s 2024 decision to move gradually away from ultra-loose policy coincides with interest-rate reductions by other major central banks.

Why does a change in risk appetite influence the Japanese Yen?

Investors often regard the Japanese Yen as a safe-haven asset, turning to it during periods of market stress because of its perceived dependability and stability. As a result, market turbulence is likely to lift the Yen against currencies considered riskier investments.