EUR/JPY Price Forecast: Holds above 181.50, positive view remains intact

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The EUR/JPY cross trades on a firmer note around 181.60 during the early European session on Tuesday. The Japanese Yen (JPY) softens against the Euro (EUR) after a massive 7.6-magnitude earthquake shook northeastern Japan late on Monday, which briefly raised concerns about economic disruptions.

EUR/JPY strengthens to near 181.60 in Tuesday’s early European session.
The cross keeps the bullish vibe unchanged, with the improving RSI momentum.
The first upside barrier to watch is 182.02; the initial support level emerges near 180.68.

Furthermore, weaker-than-expected Japan Gross Domestic Product (GDP) data for the third quarter might contribute to the JPY’s downside. This report might complicate the Bank of Japan’s (BoJ) policy decision next week.

Technical Analysis:

In the daily chart, EUR/JPY trades at 181.58. The 100-day exponential moving average trends higher, with price holding comfortably above it and reinforcing the bullish bias. Price hovers near the upper Bollinger Band at 182.02 as the bands narrow, signaling reduced volatility and a potential breakout setup. RSI at 63.51 remains firm and below overbought. A daily close through 182.02 could extend gains, while initial support sits at the middle band near 180.68.

Bollinger Band compression has intensified in recent sessions, and pullbacks would be cushioned by support at the lower band at 179.34, followed by the rising 100-day EMA at 175.67. The moving average gradient remains positive, keeping the broader topside bias intact. RSI has ticked up from 62.91 to 63.51, confirming improving momentum. A break under 179.34 would signal a deeper retracement toward 175.67, whereas maintaining the Bollinger midline would keep EUR/JPY biased higher.

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

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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