EUR/JPY Price Forecast: Softens below 178.00, bearish outlook remains intact under 100-day SMA
- EUR/JPY edges slightly lower to around 177.70 in Tuesday’s early European session.
- The negative outlook of the cross remains intact below the 100-day SMA, with bearish RSI momentum.
- The first downside target emerges at 176.52; the immediate resistance level is seen in the 177.95-178.00 zone.
The EUR/JPY cross trades with mild losses near 177.70 during the early European trading hours on Tuesday. The Euro (EUR) weakens against the Japanese Yen (JPY) as street riots in France raise concerns over political stability. Zew Surveys from Germany and the Eurozone will be released later on Tuesday. Also, European Central Bank (ECB) policymaker José Luis Escrivá is set to speak.
French authorities have imposed overnight curfews in parts of central Paris and other cities after a weekend of riots and looting across the country, per the BBC. French Prime Minister Sébastien Lecornu said on Monday that he was “fully resolved to restore public order” and had called for “local and partial” curfews if needed. There was “no question” of imposing a full curfew on entire cities, he said.
On the Japanese front, hawkish comments from a Bank of Japan (BoJ) policymaker could underpin the JPY. BoJ policy board member Junko Koeda said that there is no need to be excessively cautious about rate hikes given that upside inflation risks remain substantial.
Meanwhile, BoJ Governor Kazuo Ueda said on Monday that underlying inflation is "quite close" to the central bank's 2% target, with strong global AI demand adding to inflationary pressure from a tight job market, signalling scope for further rate increases.
Global bond selloff shifts focus to cross-currency rate trades
Strategists at Societe Generale note that the recent global bond rout has been broad-based, with the move in US Treasuries rippling across major markets. They highlight that “the bond selloff has put pressure on bonds everywhere, and a 1% rise in 10yr US yields this year has sent gilts up by 93bp, BTPs by 94bp and OATs by 123bp.”
Societe Generale argues that while this “brings its own narrative to the market,” the extent of the US move means “if the US rate story is getting stretched, that does reinforce the notion that selling EUR/JPY and GBP/AUD here, may be a better risk-reward strategy than selling EUR/USD and GBP/USD at these levels.” In their view, the current backdrop favours cross-currency relative-rate trades over outright Dollar or Pound positions.
Ueda keeps BoJ cautiously hawkish as inflation nears target
Ueda’s 7/10 FXS Speechtracker score is slightly below the historic 7.4/10 baseline, but the emphasis on “underlying inflation near 2%” and a positive wages–prices loop marks a mildly hawkish tilt. The focus on demand-led inflation from robust global activity, tight labor markets and domestic capex, alongside warnings that miscalibrated policy could push long-term rates higher, reinforces a narrative that the BoJ is edging closer to further normalization while keeping financial conditions accommodative.
At the same time, Ueda’s insistence on no shift in the fundamental bond taper approach and refusal to preannounce emergency JGB measures signal a desire to avoid market overreaction while retaining flexibility. For FX, the combination of rising inflation, the prospect of steady increases in long-term yields if short-term rates are lifted, and a commitment to stabilizing the JGB market is modestly supportive for the Yen, especially if global risk sentiment remains fragile amid Middle East-driven energy price pressures.
Technical Analysis: Bearish tone of EUR/JPY prevails under the 100-day SMA
In the daily chart, EUR/JPY keeps a bearish tone as it holds below the 20-period Bollinger simple moving average and remains well under the 100-day simple moving average (SMA). Price is also capped beneath the upper Bollinger band, reinforcing a downside bias while the Relative Strength Index (14) at 42.80 suggests subdued momentum rather than oversold conditions.
On the downside, initial support level is located at the October 15 low of 176.52. The next contention level to watch is the lower limit of Bollinger band around 175.80, where sellers may consider booking profits on further weakness.
On the topside, immediate resistance level appears in the 177.95-178.00 zone, representing the 20-period Bollinger SMA and psychological level. A stronger barrier is seen at the upper boundary of Bollinger band near 180.10, while the 100-day SMA at 182.75 marks a major resistance level that would need to be reclaimed to ease the broader bearish pressure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
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.
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.
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.
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.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
