EUR/JPY Holds Firm as Technical Setup Favors Further Upside

Key Moments

EUR/JPY Steady Near Recent Levels

EUR/JPY is fluctuating around 184.35 in the early European session on Tuesday, trading broadly flat on the day. The pair is holding its constructive tone above the 100-day exponential moving average (EMA), supported by a bullish reading in the Relative Strength Index (RSI). Initial support is identified at 183.70, while the first notable resistance is located at 185.80.

While the cross remains underpinned, its upside could face constraints as ongoing tensions between the United States and Iran have the potential to increase demand for the Japanese Yen, which is often viewed as a safe-haven currency.

At the same time, the Euro is drawing some backing from the European Central Bank’s hawkish stance. Market participants are now factoring in 2–3 interest rate hikes for 2026 in response to stronger energy-driven inflation, a notable change from earlier expectations that rates would remain on hold.

Technical Picture: Mild Bullish Bias Intact

On the daily chart, EUR/JPY maintains a mildly positive near-term outlook, with price action staying above the rising 100-day EMA near 182.10 and continuing to register a series of higher daily closes in recent sessions. The pair is also trading comfortably above the middle line of the Bollinger Bands, located around 183.70, suggesting that declines are currently being absorbed as part of an ongoing uptrend rather than signaling a bearish reversal.

The RSI stands at 55.22, remaining above the neutral 50 level and edging higher. This configuration points to positive momentum while still avoiding overbought territory.

Key Levels to Watch

From a technical standpoint, the following zones are in focus:

As long as EUR/JPY remains above 183.00 on a daily closing basis, the prevailing bias continues to favor renewed tests of the 185.80–186.30 resistance band.

Japanese Yen: Key Drivers

Fundamental Influences on JPY

The Japanese Yen (JPY) is described as one of the world’s most traded currencies. Its valuation is broadly linked to the performance of the Japanese economy, and more specifically to Bank of Japan (BoJ) policy decisions, the interest rate differential between Japanese and US government bonds, and overall risk sentiment in financial markets, among other elements.

Impact of Bank of Japan Policy

One of the Bank of Japan’s tasks is currency control, making its policy moves critical for the Yen. According to the text, the BoJ has at times intervened directly in foreign exchange markets, generally aiming to reduce the value of the Yen, although it is said to act sparingly due to political considerations with key trading partners.

The BoJ’s ultra-loose monetary stance between 2013 and 2024 is noted as a factor that led to Yen depreciation against major peers, reflecting growing policy divergence with other central banks. The subsequent gradual rollback of this ultra-loose stance is described as having provided some support to the currency.

Yield Differentials and Risk Sentiment

The gap between Japanese and US bond yields is highlighted as an additional driver. The BoJ’s commitment to ultra-loose policy over the past decade supported a widening spread between 10-year US and Japanese yields, favoring the US Dollar over the Yen. The BoJ’s 2024 decision to begin gradually stepping away from that ultra-loose framework, alongside rate cuts at other major central banks, is said to be narrowing this spread.

The Yen is also characterized as a safe-haven asset. During periods of market turmoil or elevated uncertainty, investors are described as more inclined to allocate capital to the Yen due to its perceived stability and reliability, which can strengthen JPY against currencies seen as riskier.