EUR/JPY Price Forecast: Gathers strength above 182.50 with bullish RSI momentum

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The EUR/JPY cross posts modest gains near 182.75 during the early European session on Friday.

EUR/JPY trades with mild gains around 182.75 in Friday’s early European session.
The cross maintains the positive view with strong RSI momentum.
The immediate resistance level emerges at 182.82; the initial support level is located at 181.18.

The EUR/JPY cross posts modest gains near 182.75 during the early European session on Friday. The Japanese Yen (JPY) softens against the Euro (EUR) as traders remain worried about Japan's deteriorating fiscal condition on the back of Prime Minister Sanae Takaichi's massive spending plan and sluggish economic growth. The final reading of the German Harmonized Index of Consumer Prices (HICP) will be released later on Friday.

The Bank of Japan (BoJ) interest rate decision will take center stage next week. Rising bets for an imminent rate hike by the Japanese central bank could support the JPY and act as a headwind for the cross. According to a December 2-9 Reuters poll, 90% of economists expected the BoJ to raise short-term interest rates to 0.75% from 0.50% at the December meeting. This is a significant increase over the last Reuters survey conducted last month, which only had 53%.

Technical Analysis:

In the daily chart, EUR/JPY trades at 182.75. It stands well above the rising 100-day EMA at 175.89, keeping the broader uptrend intact. The positive slope of the average supports continuation even as the distance from the mean increases. RSI at 68.85 sits near overbought, signaling strong momentum that could temper if price consolidates.

Price hovers near the upper Bollinger Band at 182.82, indicating persistent bullish pressure with stretched conditions emerging. The bands have narrowed from prior wide readings and are beginning to widen modestly, pointing to improving directional energy. A pullback would guide toward the middle band at 181.18, while deeper weakness could find support at the lower band at 179.53. A daily close above the band could open the path to fresh highs.

(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.