Key Moments
- EUR/JPY trades near 183.85 in early European dealings while holding above its 100-day EMA around 181.70.
- Rising Middle East tensions support safe-haven demand for the Japanese Yen, weighing on the cross.
- Key technical levels cluster between 183.50 support and 184.70 resistance, with the broader uptrend still intact.
Cross Slips as Geopolitical Tension Supports Yen
EUR/JPY eased to around 183.85 during Tuesday’s early European session, retreating from recent highs but still maintaining a constructive technical tone above the 100-day exponential moving average (EMA). The Relative Strength Index (RSI) remains modestly positive, helping to preserve a mildly bullish backdrop despite the latest pullback. Initial downside support is identified at 183.50, while the first notable resistance level stands at 184.70.
The softness in the cross comes as the Japanese Yen (JPY) gains ground against the Euro (EUR) on the back of renewed safe-haven demand. Ongoing hostilities in the Middle East are supporting flows into perceived haven assets. The Israeli military said it had launched a fresh wave of strikes on Tehran, the Guardian reported on Tuesday. This action came after US President Donald Trump signaled a pause in US attacks against energy infrastructure after what he said were productive talks with Iran.
Macro Backdrop: Inflation and BoJ Outlook
On the domestic front, softer-than-anticipated Japanese inflation data has eased near-term pressure on the Bank of Japan (BoJ) to tighten policy. With less urgency to raise interest rates, the scope for additional JPY appreciation may be constrained, which could in turn provide support for EUR/JPY on dips.
Technical Picture: Uptrend Intact Above 100-Day EMA
On the daily chart, EUR/JPY continues to trade above the 100-day EMA near 181.70, maintaining a mildly bullish broader trend despite the recent retreat from the upper Bollinger Band area. The pair is currently fluctuating around the middle Bollinger Band near 183.53, indicating a consolidation phase following its prior advance. The upward slope of the Bollinger Bands signals that the prevailing uptrend remains in place.
The RSI stands at 52.71, slightly above the neutral 50 mark. This positioning points to gentle positive momentum rather than overbought conditions, aligning with the view of a constructive but not extended trend.
Key Levels to Watch
Market participants are closely monitoring the following technical reference points:
| Type | Level | Description |
|---|---|---|
| Immediate support | 183.50 | Bollinger middle band and near-term floor |
| Next support | 182.00 | Secondary downside area below the mid-band |
| Strategic support | 181.70 | 100-day EMA, key trend-defining level |
| Initial resistance | 184.70 | Recent swing high |
| Upper boundary | 185.80 | Upper Bollinger Band, potential topside cap |
Overall, as long as EUR/JPY remains above the 100-day EMA, the technical framework favors buying on dips, with 183.50 and 182.00 serving as important support zones and 184.70-185.80 acting as the main resistance band in the near term.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen: Core Drivers in Focus
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.
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