EUR/JPY Price Forecast: Flat lines above 187.00; bullish bias persists amid weaker JPY

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The EUR/JPY cross struggles to capitalize on the previous day's goodish rebound from the 186.25 area, or a one-week low, and oscillates in a narrow range during the Asian session on Tuesday.

EUR/JPY consolidates in a range on Tuesday amid a combination of diverging forces.
Economic concerns due to the Hormuz risks undermine the JPY and support the cross.
Intervention fears and hawkish BoJ bets limit JPY losses, capping gains for spot prices.

The EUR/JPY cross struggles to capitalize on the previous day's goodish rebound from the 186.25 area, or a one-week low, and oscillates in a narrow range during the Asian session on Tuesday. Spot prices currently trade around the 187.20-187.25 region, nearly unchanged for the day, and remain well within the striking distance of the highest level since August 1990, touched last Friday.

The Japanese Yen (JPY) weakens slightly in reaction to a Reuters report that the Bank of Japan (BoJ) is increasingly likely to hold interest rates steady at its upcoming April meeting. This comes on top of economic concerns stemming from the Middle East conflict and the risk to energy supplies due to continued disruptions to shipping through the Strait of Hormuz. This turns out to be a key factor acting as a tailwind for the EUR/JPY cross.

The BoJ, however, is expected to signal readiness to hike in June as imported energy costs cloud the inflation picture. Moreover, speculations that Japanese authorities would step in to stem further weakness in the domestic currency hold back the JPY bears from placing aggressive bets. Apart from this, a modest US Dollar (USD) uptick is seen weighing on the shared currency, which contributes to capping the upside for the EUR/JPY cross.

The recent breakout above the 185.00 psychological mark comes on top of repeated rebounds from the 100-day Exponential Moving Average (EMA) and favors the EUR/JPY bulls. Adding to this, the Moving Average Convergence Divergence (MACD) indicator is in positive territory, and its histogram is still constructive. Moreover, the Relative Strength Index (RSI) hovers around 64, hinting at strong but not yet extreme buying pressure.

Meanwhile, initial support is reinforced by the 100-day EMA near 183.04, where a deeper pullback would be expected to attract dip-buying interest while the broader bullish structure remains intact. Unless the EUR/JPY cross slides back through this floor, the technical setup suggests that spot prices remain positioned to extend gains, with any consolidation above the moving average likely to be viewed as a pause within the prevailing uptrend rather than a trend reversal.

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

EUR/JPY daily chart

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.