176.50 Cleared: EUR/JPY Strengthens, but Price Forecast Remains Bearish Below 100-day SMA

176.85 is EUR/JPY’s approximate level. The cross edges higher in early Asian trading on Friday.
Below the 100-day SMA, the cross retains a negative bias, reinforced by bearish RSI momentum.
178.25 marks the first resistance level, while initial support stands at 176.16.

176.85 is EUR/JPY’s approximate trading level. The cross holds gains in Friday’s early European session, with traders closely watching for intervention by Japanese authorities to support the Japanese Yen (JPY).

One-sided, rapid foreign exchange movements have recently drawn officials’ attention, Japanese Finance Minister Satsuki Katayama said on Friday. She added that the government would take appropriate action on currency volatility and engage with the US Treasury.

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

Weak consumption means interest rate increases risk depressing underlying inflation, Bank of Japan (BoJ) board member Toichiro Asada said on Thursday. He said the central bank must remain alert to that risk.

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.

JGB demand strengthens as BoJ credibility supports medium-term Yen prospects

Improving confidence is underpinning Japan’s government bond market, 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 data “confirming this pick-up in JGB buying by Japanese households” as evidence of a marked 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.”

Further support for retail demand could come from policy 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,” and identifies “early signs of a shift in flows perhaps,” arguing 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.”

4.4/10: BoJ’s Asada moderates hike expectations, retains gradual tightening option for Dollar/Yen

A 4.4/10 FXS Speechtracker score places BoJ’s Asada speech modestly above its historical 3.8/10 baseline, indicating slightly greater impact and a cautiously hawkish tone. His emphasis on remaining “mindful” of the risk that rate rises could weaken underlying inflation when consumption is subdued signals little appetite for rapid tightening. The absence of a clear terminal rate reinforces that message. At the same time, his focus on Central Bank independence and the scope for either future increases or cuts leaves policy options open.

Compared with earlier communication, Asada’s remarks lean hawkish: Japan’s nominal neutral rate could be somewhat higher than the current policy rate, he is “not against raising rates altogether,” and rates might eventually need to increase slowly. For Dollar/Yen, his unwillingness to identify a desirable exchange rate, alongside a preference for gradual moves guided by data, points to limited near-term upside in rate expectations. A medium-term tilt towards incremental normalisation nevertheless remains, moderating strongly Yen-bullish views while limiting extreme Dollar strength.

Technical Analysis: 100-day SMA keeps EUR/JPY’s bearish bias intact

Below the 100-day simple moving average (SMA) and only slightly above the Bollinger middle band, EUR/JPY retains a bearish short-term bias on the daily chart. Trading is 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. Sellers therefore appear to retain control, though pressure is not extreme.

At around 178.25, the upper boundary of the Bollinger Band provides initial resistance before the psychological 180.00 level. A decisive move above the latter could open the way towards the more important 100-day SMA at 181.25, which continues to restrain recovery attempts.

The 6 November low of 176.16 provides immediate downside support, ahead of the lower Bollinger Band boundary 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.)

Japanese Yen: key questions answered

Which factors shape the Japanese Yen’s value?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) broadly reflects 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.

How does Bank of Japan policy affect the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions important for the Yen. Direct intervention in foreign exchange markets has occasionally been used, typically to weaken the currency. Political concerns among Japan’s main trading partners, however, discourage frequent intervention. From 2013 to 2024, the BoJ’s ultra-loose monetary stance weakened the Yen against its major peers as policy increasingly diverged from that of other leading central banks. The more recent gradual withdrawal of that stance has provided the currency with some support.

Why does the Japan-US bond yield gap matter for the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ widened its policy divergence from other central banks, especially the US Federal Reserve. This helped expand the yield gap between 10-year US and Japanese bonds, supporting the US Dollar against the Japanese Yen. That gap is now narrowing as the BoJ’s 2024 decision to phase out ultra-loose policy coincides with interest rate cuts by other major central banks.

Why does market risk sentiment influence the Japanese Yen?

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