176.00 gives way: EUR/JPY price forecast as pair retreats after bullish opening gap

175.10 remains a potential test for EUR/JPY at its 12-month low.
Near 33, the 14-day Relative Strength Index points to continued momentum weakness.
At 176.69, the nine-day EMA presents the first resistance hurdle.

EUR/JPY trades near 175.90. The cross is recovering during Monday’s Asian session following three consecutive days of declines. On the daily chart, price action remains inside a descending channel, signalling that the bearish bias persists.

Trading below both its nine- and 50-period Exponential Moving Averages (EMAs), EUR/JPY retains a bearish short-term outlook. The shorter EMA sits beneath the longer average, and both continue to cap prices, limiting recovery attempts. Meanwhile, a 14-day Relative Strength Index (RSI) reading of around 33 points to sustained momentum weakness, rather than outright oversold conditions.

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

A test of 175.10, the 12-month low recorded on 23 October, may be next for EUR/JPY. Beyond that lies the descending channel’s lower boundary around 175.00. A break beneath this confluence of support would leave the cross exposed to the area around 169.72, its 15-month low.

Recovery attempts face initial resistance at 176.69, the nine-day EMA, before the descending channel’s upper boundary near 178.60. The 50-day EMA at 179.38 provides the next hurdle. Clearing that medium-term moving average would trigger a bullish reversal and support a move towards the area around the all-time high of 187.95, set on 17 April.

Chart Analysis EUR/JPY — EUR/JPY: Daily Technical Chart

Japan core CPI at +2.1%: Yen strengthens as risk aversion persists

Risk aversion continues to support the Yen, according to MUFG analysts, who say it “has continued to trade at stronger levels at the end of this week encouraged by more risk-off trading conditions.” Highlighting its defensive appeal as risk sentiment shifts, they report that USD/JPY “fell to a low overnight of 156.08 but has since risen back up towards the 157.00-level as the sell-off in Asian equity markets reversed,”

Domestic inflation adds another dimension to these market moves. Deutsche Bank notes that “in Japan, September inflation rose as expected overnight, with core CPI accelerating to a nine-month high of +2.1% y/y and moving above the BoJ’s target, supported by higher energy costs and yen weakness.” With the Yen strengthening and core CPI above target, the market is weighing safe-haven flows against changing domestic price pressures.

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

Japanese Yen: Key Questions

Which factors shape the Japanese Yen’s value?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) broadly reflects the performance of Japan’s economy. 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 policy: What does it mean for the Yen?

Currency control is part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. Direct intervention in foreign exchange 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 weakened the Yen against its major peers as its policy stance increasingly diverged from those of other leading central banks. The gradual unwinding of that policy has more recently provided some support for the currency.

Japan-US bond yield gap: How does it affect the Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved further apart from other central banks, notably the US Federal Reserve. That divergence helped widen the gap between 10-year US and Japanese bond yields, favouring the US Dollar over the Japanese Yen. The gap is now narrowing as the BoJ’s 2024 decision to gradually exit ultra-loose policy combines with interest-rate cuts by other major central banks.

Risk sentiment: Why does it matter for the Yen?

Investors often regard the Japanese Yen as a safe-haven investment. During periods of market stress, its perceived stability and reliability make them more inclined to move money into the currency. As a result, turbulent conditions are likely to lift the Yen against currencies considered riskier investments.