EUR/JPY Price Forecast: Keeps bullish vibe above 162.00, further consolidation cannot be ruled out
- EUR/JPY weakens to around 162.35 in Friday’s early European session.
- Positive view of the cross prevails above the 100-day EMA , but further consolidation cannot be ruled out.
- The immediate resistance level emerges at 163.31; the initial support level to watch is 161.88.
The EUR/JPY cross edges lower to near 162.35 during the early European session on Friday. The Japanese Yen (JPY) strengthens against the Euro (EUR) due to rising expectations that the Bank of Japan (BoJ) will continue raising interest rates this year. The bets were supported by hotter-than-expected Consumer Price Index (CPI) inflation reports from Japan released earlier this Friday.
Technically, in the longer term, the bullish trend of EUR/JPY remains in play as the cross is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. Nonetheless, further consolidation or temporary sell-off cannot be ruled out, with the 14-day Relative Strength Index (RSI) standing below the midline near 46.95.
In the bullish case, the immediate resistance level is located at 163.31, the high of May 21. Sustained trading above this level could attract some buyers to 164.80, the upper boundary of the Bollinger Band. Further north, the next hurdle to watch is 166.00, the psychological level and the high of November 7, 2024.
The first downside target for the cross emerges at 161.88, the 100-day EMA. Extended losses could see a drop to 161.33, the lower limit of the Bollinger Band. A breach of this level could pave the way to the key contention level at the 160.00 psychological mark.
EUR/JPY daily chart
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.
EUR/JPY daily chart