EUR/JPY Price Forecast: Bearish bias persists below 100-day SMA despite gains above 176.50

• Modest buying lifts EUR/JPY towards 176.85 during early Asian trading on Friday.
• Bearish RSI momentum reinforces the cross’s negative bias as it stays below the 100-day SMA.
• While 178.25 marks the first resistance, 176.16 provides the nearest support.

Gains in EUR/JPY take the cross to around 176.85 in Friday’s early European session, even as traders remain highly alert to possible intervention by Japanese authorities to support the Japanese Yen (JPY).

With recent foreign exchange moves proving rapid and one-sided, Japanese Finance Minister Satsuki Katayama said on Friday that officials were monitoring developments. The government would respond appropriately to currency volatility and engage with the US Treasury, Katayama added.

Weak consumption means the Bank of Japan (BoJ) must remain alert to the possibility that interest rate increases could depress underlying inflation, board member Toichiro Asada said on Thursday.

Most economists surveyed by Reuters expect the European Central Bank (ECB) to raise its deposit rate next month for the final time in this cycle. However, with inflation reaching twice the 2% target, more than a third anticipate another increase in early 2027.

Can stronger Japan JGB demand and BoJ credibility support the medium-term Yen outlook?

Improving confidence in Japanese government bonds is evident, according to 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” that indicate a substantial increase in issuance aimed at individual investors. 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 further support from potential tax changes. MUFG/BTMU highlights “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,” while observing “early signs of a shift in flows perhaps,” and maintaining 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.” Citing “intervention likely halting the prospects to the upside, and confidence in the BoJ improving,” the bank concludes that “the risks certainly look more skewed to yen strength over the medium term.”

What does BoJ’s Asada mean for Dollar/Yen as hike expectations ease but gradual tightening remains possible?

A cautiously hawkish tone emerges from BoJ’s Asada speech, which registers 4.4/10 on FXS Speechtracker against the historical baseline of 3.8/10, suggesting a slightly greater impact. His warning to remain “mindful” of the risk that rate increases could weaken underlying inflation when consumption is subdued, alongside the absence of a clear terminal rate, signals little appetite for hurried tightening. At the same time, his emphasis on central bank independence and scope for future rate increases as well as cuts leaves policy choices wide open.

Relative to earlier communication, Asada’s remarks carry a hawkish tilt: Japan’s nominal neutral rate could be somewhat higher than the present policy rate, he is “not against raising rates altogether,” and gradual increases may become necessary at some point. For Dollar/Yen, his unwillingness to identify a desirable exchange rate and his preference for measured, data-dependent adjustments point to limited room for near-term increases in rate expectations. Nevertheless, the medium-term inclination towards incremental normalisation remains, restraining strongly Yen-bullish narratives while limiting extreme Dollar strength.

Technical Analysis: Can EUR/JPY Shake Off Its Bearish Bias Below The 100-Day SMA?

Sellers retain the near-term advantage on the EUR/JPY daily chart, where the cross remains below the 100-day simple moving average (SMA) and only slightly above the middle Bollinger band. Trading in the lower half of the Bollinger envelope, the pair shows muted, mildly negative momentum, with the Relative Strength Index (RSI) at 46 rather than in oversold territory. This suggests selling pressure remains in control without reaching extreme levels.

Any recovery initially faces the upper boundary of  the Bollinger Band around 178.25, ahead of the psychological 180.00 mark. If that level is decisively cleared, the next significant hurdle would be the 100-day SMA at 181.25, which continues to restrict recovery attempts.

Should the cross weaken, the 6 November low at 176.16 offers immediate support, with the lower Bollinger Band boundary around 175.35 next in focus. A break beneath the latter 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.)