EUR/JPY Pulls Back but Holds Bullish Structure

Key Moments

Spot Market Overview

EUR/JPY is edging lower around 187.50 in early European trading on Thursday, posting slight declines on the session. The move reflects a firmer Japanese Yen (JPY) against the Euro (EUR) amid renewed concerns that Japanese authorities could step into the foreign exchange market.

Japan’s Finance Minister Satsuki Katayama said on Thursday that she told the G7 to closely watch forex moves, a remark that has reinforced caution among traders over potential intervention.

Expectations around monetary policy are also in focus. The Bank of Japan (BoJ) is anticipated to lift its benchmark rate to 1.00% by end-June, with nearly two-thirds of economists in a Reuters poll projecting such a move. A rate increase in April or June is viewed as equally probable, with uncertainty tied to the fallout from the Iran war shaping the outlook.

Technical Picture: Bullish Bias Intact

On the daily chart, EUR/JPY continues to display a positive near-term structure, as price action remains comfortably above the 100-day exponential moving average (EMA). The cross is trading near the upper edge of its recent volatility band, indicating persistent buying interest.

The 14-day Relative Strength Index (RSI) sits just below overbought levels at around 69. This configuration underlines robust upward momentum while signaling that additional gains could leave the pair vulnerable to a corrective pullback if they occur without consolidation.

Key Levels to Watch

Upside and downside reference levels for EUR/JPY are summarized in the table below:

On the topside, the initial obstacle is aligned with the upper Bollinger Band at 187.95, which opens the way toward 188.50 if broken. On the downside, any retreat is expected to encounter first support around the April 13 low at 186.20. Below that, the middle Bollinger Band near 185.00 represents the next technical zone of interest, followed by the rising 100-day EMA at 182.75 in the event of a more pronounced setback.

Background on the Japanese Yen

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its performance is broadly influenced by the state of the Japanese economy, with particular emphasis on Bank of Japan policy decisions, the spread between Japanese and US bond yields, and overall market risk sentiment.

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.