EUR/JPY Price Forecast: Posts modest gains near 183.50, further consolidation cannot be ruled out

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The EUR/JPY cross posts modest gains near 183.50 during the early European session on Tuesday.

EUR/JPY trades with mild gains around 183.50 in Tuesday’s early European session.
The cross holds a positive outlook, but consolidation cannot be ruled out in the near term amid neutral RSI.
The immediate resistance level emerges at 185.80; the initial support level to watch is 182.20.

The EUR/JPY cross posts modest gains near 183.50 during the early European session on Tuesday. The Euro (EUR) edges higher against the Japanese Yen (JPY) as the European Central Bank (ECB) is expected to maintain its current policy through 2026, while the Bank of Japan (BoJ) faces reduced urgency for further rate hikes following a sharp drop in Tokyo CPI inflation in January.

Furthermore, Japanese Prime Minister Sanae Takaichi has called for a snap general election on February 8. Political uncertainty in Japan and expectations of Takaichi's reflationary policies could weigh on the JPY and create a tailwind for the cross.

On the other hand, the upside for EUR/JPY might be limited amid potential intervention from Japanese authorities. Japan’s Finance Minister Satsuki Katayama stated on Tuesday that she will continue to closely coordinate with US authorities as needed, based on a joint Japan and US statement issued in September last year, and respond appropriately.

Technical Analysis:

In the daily chart, EUR/JPY holds above the 100-day EMA, underscoring a still-positive medium-term bias. Price consolidates around the 20-day SMA at 184.00, and a close back above this pivot could restore topside momentum. RSI at 49.22 sits near neutral, confirming the recent loss of impulse.

Bollinger Bands are starting to narrow, with the pair holding below the middle band, pointing to reduced volatility and a mild downward skew. The upper band at 185.80 caps rallies, while the lower band at 182.20 supports. A topside break would open room for continuation, whereas a close beneath support would turn focus to the rising 100-day EMA at 180.08.

(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.