Above 176.50: EUR/JPY Price Forecast Shows Gains Holding, but Bearish Bias Persists Below 100-day SMA

176.65 is the approximate level for EUR/JPY, which edges higher in early Asian trading on Monday.
Policymakers are ready to step up monetary tightening, the BoJ meeting minutes showed.
Below the 100-day SMA, the cross retains a bearish outlook, reinforced by negative RSI momentum.
176.80 marks immediate resistance, while 175.70 is the first support level in focus.

176.65 is the approximate trading level for EUR/JPY. The cross posts gains in Monday’s early European session, although hawkish signals from the Bank of Japan (BoJ) could constrain further upside.

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

Expectations of a December rate increase were reinforced last month when the BoJ held rates steady but stressed its determination to address inflation risks. Minutes of its September meeting, published on Thursday, showed that most policymakers considered additional rate rises appropriate as underlying inflation moved towards the central bank’s 2% target.

Former BoJ top economist Seisaku Kameda said on Friday that the central bank is expected to increase interest rates in December. He expects further rises in borrowing costs next year until they reach 2%, to counter mounting inflationary pressure.

Yen leads as AI volatility weakens Dollar’s safe-haven appeal

Recent trading has put the Japanese Yen clearly ahead of its peers, according to analysts at OCBC, who note that “the standout has been the JPY.” They say the currency’s strength “reinforces its value as a hedge against a reversal in the US-centric AI trade,” while cautioning that “it is probably too early to expect sustained JPY gains purely on AI concerns.” OCBC’s forward view is that “more frequent US-centric AI volatility in 2027 could strengthen its hedge appeal,” especially as the “AI sell-off is creating competing forces for the USD.” The analysts explain that “falling US yields are blunting the USD’s safe-haven appeal, leaving the JPY as the standout hedge against more US-centric volatility.”

Domestic Japanese flows could offer a further driver beyond the AI theme, OCBC adds. The bank identifies “Japanese portfolio rebalancing” as “the other potential JPY catalyst,” with investors preparing to examine “GPIF’s July-September results for signs of a shift towards domestic assets.” According to OCBC, “if GPIF and other Japanese investors bring more money home or increase FX hedging on overseas assets, an important source of structural JPY selling could fade,” so “GPIF flows could provide another tailwind for the JPY.”

Technical Analysis: 100-day SMA caps EUR/JPY

Trading below both the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ middle line, EUR/JPY retains a bearish short-term bias on the daily chart. The cross sits in the lower half of the Bollinger envelope, making the lower band the nearest downside reference. At 44.39, the Relative Strength Index (RSI) points to weak momentum rather than outright oversold conditions.

The Bollinger middle band, near 176.80, presents the first upside barrier. Beyond it lies the upper Bollinger band around 178.30. Sustained buying above that level could bring the psychological 180.00 threshold into view, ahead of the 100-day SMA at 181.50.

Initial downside support comes from the 2 November low of 175.70, with the lower Bollinger band at 175.30 next in line. A clear break beneath 175.30 would likely expose the 6 October 2025 low of 174.74.

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

Japanese Yen: Key Questions

Main drivers of the Japanese Yen

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Bank of Japan decisions and their effect on the Yen

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. Direct intervention in currency markets has occasionally been used by the BoJ, usually to weaken the currency. Political concerns among Japan’s main trading partners, however, discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy widened the policy gap with other major central banks, weakening the Yen against its main currency peers. The more recent, gradual withdrawal of that ultra-loose stance has provided the Yen with some support.

Japanese and US bond yield spreads: Implications for the Yen

A widening policy gap with other central banks, especially the US Federal Reserve, developed over the last decade as the BoJ maintained its ultra-loose monetary stance. That divergence helped widen the spread between 10-year US and Japanese bond yields, supporting the US Dollar against the Japanese Yen. The spread is now narrowing as the BoJ’s 2024 decision to move gradually away from ultra-loose policy coincides with interest-rate cuts by other major central banks.

Risk sentiment and demand for the Japanese Yen

Investors frequently regard the Japanese Yen as a safe-haven asset. During market stress, its perceived stability and reliability make them more inclined to allocate funds to the currency. As a result, periods of turbulence are likely to lift the Yen against currencies considered riskier investments.