EUR/JPY Price Forecast: Declines to near 175.50, bearish signals reinforce downside bias

EUR/JPY softens to near 175.65 in Wednesday’s early European session.
The cross keeps a negative tone below the 100-day SMA, with bearish RSI momentum.
The initial support level is seen at 175.45; the first upside barrier emerges at 176.43.

The EUR/JPY cross trades in negative territory around 175.65 during the early European trading hours on Wednesday. The Japanese Yen (JPY) strengthens against the Euro (EUR) amid fears of currency intervention from Japanese authorities.

Japanese Finance Minister Satsuki Katayama said on Tuesday that the government stood ready to take decisive action in the currency market. Katayama added that officials will closely monitor market moves with heightened urgency, including at this moment.

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Traders await the European Central Bank (ECB) interest rate decision later on Thursday for fresh impetus. On Friday, attention will shift to the Bank of Japan (BoC) policy meeting.

The ECB previously raised its three key policy rates by 25 basis points (bps) in September. The ECB will announce its interest decision on Thursday and is likely to maintain the rates. However, expectations of rate hikes at subsequent meetings remain high amid elevated oil prices and inflation risks.

The BoJ is expected to keep the policy rate unchanged at 1.25% at the end of its two-day meeting on Friday. The Japanese central bank is anticipated to declare that its “underlying inflation” target of 2% has been met at this meeting, according to reports by Reuters.

Yen seen under pressure as BoJ caution delays risk of intervention

Analysts at MUFG/BTMU argue that the threat of official action remains some way off, noting that “we are likely still some distance from that with the 160-level the obvious point in which those threats could turn into action.” They add that “the yen may well struggle through this week with investors likely anticipating BoJ Governor Ueda being more cautious in his words on Friday given the global backdrop.”

MUFG/BTMU expect the BoJ to acknowledge the need for further tightening but caution that the tone may fall short of market hopes, stating that “the BoJ will be mindful of that and while we expect the BoJ to signal more rate hikes are necessary, Ueda’s style of communication suggests he may not provide a strong message on a move in December that remains 80% priced.”

BoJ’s Himino flags AI capex and inflation risks, backing stronger Yen

BoJ’s Himino scores 8.2 on FXS Speechtracker, exactly in line with the speaker’s historic average, but the emphasis on rising underlying inflation and inflation expectations marks a hawkish tilt. References to strong AI-driven capex, robust exports, accommodative financial conditions, and rapidly expanding bank lending underscore that real rates remain low and that upside price risks are becoming more prominent.

The warning that postponing policy changes could trigger inflation risks and damage the economy signals growing readiness to tighten policy to secure stable prices. For FX, the combination of near-target underlying inflation and elevated upside price risks supports expectations of further normalization, which is Yen-positive, especially against low-yielding peers.

Technical Analysis: EUR/JPY maintains a negative outlook under the 100-day SMA

In the daily chart, EUR/JPY keeps a bearish near-term bias as spot holds well below the 100-day Moving Average (MA) and beneath the Bollinger Bands’ 20-day simple moving average. Price is hovering just above the lower Bollinger Band support, while the Relative Strength Index (14) at 32.67 sits close to oversold territory, hinting that although downside pressure dominates, the sell-off is already stretched.

On the downside, the lower limit of Bollinger Band at 175.45 is the first notable support level. A clear break beneath this area would expose the October 23 low of 175.10, followed by the October 6, 2025 low of 174.74.

On the topside, initial resistance level emerges at the October 26 high of 176.43, en route to the Bollinger middle band around 177.00 and the upper boundary of Bollinger band near 178.50. Any follow-through buying above this level could pave the way to the 180.00 psychological level and the 100-day MA at 182.20.

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

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.

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