EUR/JPY Extends Slide as Technical Signals Point to Deeper Weakness

Key Moments:

EUR/JPY Under Pressure Within Descending Channel

EUR/JPY continues to trade on the back foot for a fourth consecutive session, hovering near 177.70 during Asian trading on Wednesday. On the daily chart, price action remains locked inside a clearly defined descending channel, which continues to favor a bearish outlook for the cross.

The pair is maintaining a negative short-term bias as it trades beneath both the nine-period and 50-period Exponential Moving Averages (EMAs). With the shorter EMA positioned below the longer one and spot prices holding under both, EUR/JPY faces a layered resistance zone from these moving averages, limiting any recovery attempts. At the same time, the 14-day Relative Strength Index (RSI) at 31.77 is approaching oversold territory, suggesting that while selling pressure persists, the pace of the decline may be moderating rather than definitively reversing.

Key Technical Levels: Support and Resistance

From a downside perspective, the cross may extend losses toward the lower edge of the descending channel at 176.90. A break of that support could open the way for a move toward the 11-month low at 175.70, which was registered in November 2025.

On the upside, any rebound is likely to encounter initial resistance at the nine-day EMA, currently at 179.13. A sustained move above this short-term average could encourage a shift toward a more constructive tone, potentially paving the way for a test of the 50-day EMA at 181.83. Beyond that, additional resistance is located near the top of the descending channel around 184.50, followed by the all-time high at 187.95 set on April 17.

Yen Strength Backed by Renewed Japanese FX Warnings

Yen performance stands out across G10 currencies as analysts at Scotiabank describe JPY as diverging from the broader defensive tone in markets. They characterize it as “the only notable exception” to the prevailing risk-averse backdrop and link the move to official commentary out of Japan.

According to Scotiabank, there was “a clear late Asian-session surge driven by FX-related comments from Japan’s Vice Minister for International Affairs, Atsushi Mimura,” who “reminded market participants to heed last week’s warnings from both PM Takaichi and FinMin Katayama.” This renewed emphasis from senior policymakers has supported the Yen on the crosses, contrasting with weakness seen in other currencies.

Context: Bank of Japan and Policy Backdrop

The Bank of Japan (BoJ) serves as Japan’s central bank, responsible for issuing banknotes and implementing currency and monetary policy. Its primary objective is to maintain price stability, which is defined as achieving an inflation rate of around 2%.

The BoJ adopted an ultra-loose monetary stance starting in 2013, seeking to boost economic activity and push inflation higher in a low-inflation environment. Its framework, known as Quantitative and Qualitative Easing (QQE), involved creating liquidity to purchase assets such as government and corporate bonds. In 2016, the central bank intensified this approach by introducing negative interest rates and moving to directly manage the yield on 10-year Japanese government bonds. In March 2024, the BoJ raised interest rates, signaling a move away from its ultra-loose policy position.

This extended period of aggressive stimulus contributed to a weaker Yen versus major counterparts. The depreciation accelerated in 2022 and 2023 as other major central banks raised interest rates sharply to combat elevated inflation, widening rate differentials and putting further downward pressure on JPY. The trend saw a partial reversal in 2024 when the BoJ began to unwind its ultra-accommodative stance.

The central bank’s decision to pivot was influenced by a weaker Yen and higher global energy prices, both of which pushed Japanese inflation above the 2% target. Expectations for rising wages in Japan – a critical driver of sustained inflation – also played a role in prompting the BoJ to begin normalizing policy.