EUR/JPY Price Forecast: Bearish bias persists as pair stays above 176.00

Downside risks for EUR/JPY could bring the 12-month low of 175.10 into focus.
Upside momentum remains muted, with the 14-day Relative Strength Index near 35.98 indicating weakness rather than oversold conditions.
At 176.60, the nine-day EMA presents the first resistance hurdle.

A clear bearish bias persists in EUR/JPY despite a second consecutive day of gains, with the cross trading near 176.20 in Tuesday’s Asian session. The descending channel on the daily chart underpins this negative technical outlook.

Trading below both its nine- and 50-day Exponential Moving Averages (EMAs), EUR/JPY retains a bearish bias. These short- and medium-term averages suggest that upside attempts remain constrained. Meanwhile, a reading of 35.98 on the 14-day Relative Strength Index (RSI) points to weak upward momentum, rather than outright oversold conditions.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A potential downside test for EUR/JPY is the 12-month low of 175.10 recorded on 23 October, with the descending channel’s lower boundary around 174.80 coming next. A break beneath this confluence of support would leave scope for the cross to move towards the area surrounding the 15-month low of 169.72.

Any recovery would first face the nine-day EMA at 176.60, before encountering the descending channel’s upper boundary near 178.50. Beyond that, the 50-day EMA at 179.26 provides another resistance level. Clearing this medium-term average would trigger a bullish reversal and support a move towards the region of the all-time high of 187.95, recorded on 17 April.

Chart Analysis EUR/JPY — EUR/JPY: What Does the Daily Chart Signal?

Will the BoJ hold at 1.25% before its next tightening move?

Expectations of a pause centre on policymakers assessing the effects of the latest rate increase before considering another policy-rate adjustment. Elias Haddad of Brown Brothers Harriman notes that the Bank of Japan is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again,” highlighting the market’s view.

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

Bank of Japan: Frequently Asked Questions

What role does the Bank of Japan play?

As Japan’s central bank, the Bank of Japan (BoJ) determines the country’s monetary policy. Its responsibilities include issuing banknotes and managing currency and monetary conditions to maintain price stability, defined by an inflation target of around 2%.

How has the Bank of Japan’s policy evolved?

Against a backdrop of low inflation, the Bank of Japan adopted an ultra-loose monetary policy in 2013 to support economic activity and lift prices. At the heart of this approach is Quantitative and Qualitative Easing (QQE), which involves printing money to purchase assets, including government and corporate bonds, and inject liquidity. The bank expanded this strategy in 2016, easing policy further by introducing negative interest rates and subsequently taking direct control of the yield on its 10-year government bonds. An interest-rate increase in March 2024 marked the BoJ’s effective retreat from its ultra-loose stance.

How does Bank of Japan policy affect the Japanese Yen?

The Yen weakened against other major currencies as a result of the Bank’s extensive stimulus programme. That depreciation intensified in 2022 and 2023 as the policy gap widened between the Bank of Japan and other leading central banks, which raised interest rates aggressively to tackle inflation at multi-decade highs. The BoJ’s stance widened interest-rate differentials with other currencies, putting downward pressure on the Yen. In 2024, this trend reversed in part after the BoJ opted to move away from its ultra-loose policy.

What prompted the Bank of Japan to begin reversing its ultra-loose policy?

Japanese inflation climbed above the BoJ’s 2% target as a weaker Yen combined with a surge in global energy prices. Expectations of higher domestic wages, a key driver of inflation, also helped prompt the policy shift.