EUR/JPY Price Forecast: Constructive view prevails, first upside barrier emerges above 185.00

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EUR/JPY flat lines around 184.15 in Tuesday’s early European session.
The positive outlook of the cross prevails above the 100-day EMA, with a bullish RSI indicator.
The first upside barrier to watch is 185.00; the initial support level is seen at 183.85.

The EUR/JPY cross trades on a flat note near 184.15 during the early European session on Tuesday. Japan's Prime Minister Sanae Takaichi said on Monday that she will dissolve parliament this week and hold a snap election on February 8. Her vow to suspend an 8% sales tax on food for two years has focused attention on the country's shaky public finances. Political uncertainty ahead of elections could weigh on the Japanese Yen (JPY) against the Euro (EUR).

On the other hand, expectations that Japanese authorities would intervene to counter further weakness in the domestic currency could underpin the JPY. Japan's Finance Minister Satsuki Katayama warned last week that all options, including a direct intervention in the market, are available to deal with the recent weakness in the Japanese Yen.

Technical Analysis:

In the daily chart, EUR/JPY holds well above the 100-EMA at 179.28, and the average continues to slope higher, underpinning the broader uptrend. RSI at 55.75 has edged up from 55.62, signaling steady bullish momentum without overbought conditions. Spot remains above the middle Bollinger Band at 183.85, while the upper band at 185.00 caps the immediate topside.

Bollinger Bands tilt higher, reflecting a persistent trend with moderate volatility. RSI staying above 50 supports continuation, though a loss of the band midline would cool momentum. A close above the band ceiling could extend the rally, whereas a break below the lower band at 182.72 would turn attention to a deeper pullback phase.

(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.