EUR/JPY Price Forecast: Gains to near 183.50 on BoJ rate hike uncertainty, bullish bias persists

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The EUR/JPY cross gathers strength to around 183.50 during the early European trading hours on Tuesday. The Japanese Yen (JPY) weakens against the Euro (EUR) due to the uncertainty over the timing of the next Bank of Japan’s (BoJ) rate hike and a positive risk tone.

EUR/JPY gains ground to near 183.50 in Tuesday’s early European session.
The timing of the next BoJ rate hike is uncertain, weighing on the Japanese Yen.
The cross keeps the bullish vibe on the daily chart; first upside barrier emerges at 185.00, while initial support to watch is 181.87.

BoJ Governor Kazuo Ueda said on Monday that rate increases will continue if economic and price trends align with the central bank's forecasts of a sustained inflation cycle. Most analysts anticipate the next hike around mid-year, after the spring "shunto" wage negotiations confirm solid wage increases.

On the Euro’s front, the European Central Bank (ECB) kept rates unchanged at its December policy meeting, and its outlook suggested less urgency for further cuts. This, in turn, could provide some support to the EUR against the JPY. Economists widely anticipate that the ECB will continue to hold rates steady through 2026.

Technical Analysis:

In the daily chart, EUR/JPY holds well above the rising 100-day EMA at 178.25, preserving a firm bullish bias. The long-term average continues to climb, while the short-term mean has converged with spot, signaling equilibrium after a strong run. Price sits on the middle Bollinger Band as the bands narrow, indicating reduced volatility and a pause in trend. RSI at 55.91 points to moderate bullish momentum. Upside focus stands at the upper band near 185.00, while initial support is the lower band at 181.87.

The uptrend structure remains intact with upward-sloping averages, suggesting dips would be supported toward the 100-day EMA at 178.25. The contraction in Bollinger Bands sets a breakout context, and a decisive push away from the middle band would define the next leg. Momentum is neutral-to-positive on RSI, and further improvement would strengthen the bullish bias. A close above 185.01 could extend gains, whereas a break below 181.87 would expose downside toward 178.25.

(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.