Key Moments
- EUR/JPY trades near 177.70 with mild losses as political tensions in France weigh on the Euro.
- The cross maintains a bearish technical profile below the 100-day SMA at 182.75, with RSI (14) at 42.80 signaling weak momentum.
- Key downside level is the October 15 low at 176.52, while immediate resistance is clustered in the 177.95-178.00 area.
Euro-Yen Slides as Political Concerns and BoJ Signals Support JPY
EUR/JPY is trading modestly lower around 177.70 during early European hours on Tuesday. The pair is softening as the Euro (EUR) comes under pressure against the Japanese Yen (JPY), with investors reacting to political unrest and security concerns in France.
Authorities in France have implemented night-time curfews in parts of central Paris and other cities following a weekend marked by riots and looting, according to the BBC. French Prime Minister Sébastien Lecornu stated on Monday that he was “fully resolved to restore public order” and called for “local and partial” curfews where necessary, adding there was “no question” of imposing a full curfew on entire cities.
Later on Tuesday, markets are awaiting the release of ZEW surveys from Germany and the broader Eurozone, along with remarks from European Central Bank (ECB) policymaker José Luis Escrivá, events that could influence sentiment toward the Euro.
BoJ Commentary Adds Fundamental Support to the Yen
On the Japanese side, recent communication from the Bank of Japan (BoJ) has taken on a more hawkish tone, lending some support to the Yen.
BoJ policy board member Junko Koeda commented that there is no need to be overly cautious regarding interest rate increases given that upside inflation risks remain significant.
BoJ Governor Kazuo Ueda reinforced that message on Monday, saying that underlying inflation is “quite close” to the central bank’s 2% target, citing strong global demand for AI and a tight labor market as factors adding to price pressures. His remarks hint at room for additional rate hikes.
Global Bond Rout Shifts Preference Toward Cross-Currency Rate Trades
Strategists at Societe Generale highlight that the recent selloff in global bonds has been widespread, with moves in US Treasuries transmitting across other major fixed income markets. They observe that “the bond selloff has put pressure on bonds everywhere, and a 1% rise in 10yr US yields this year has sent gilts up by 93bp, BTPs by 94bp and OATs by 123bp.”
The bank’s strategists argue that while this “brings its own narrative to the market,” the size of the move in US yields means “if the US rate story is getting stretched, that does reinforce the notion that selling EUR/JPY and GBP/AUD here, may be a better risk-reward strategy than selling EUR/USD and GBP/USD at these levels.” In their assessment, the current environment is more favorable for relative-value trades in cross-currency pairs than for taking outright positions in the Dollar or the Pound.
Ueda’s Stance Keeps BoJ Cautiously Hawkish
Ueda’s 7/10 FXS Speechtracker score is described as slightly below the historic 7.4/10 average. However, his stress on “underlying inflation near 2%” and on a constructive interaction between wages and prices is characterized as mildly hawkish.
The focus on demand-driven inflation stemming from solid global activity, tight labor conditions and domestic capital expenditure, together with caution that poorly calibrated policy might push long-term yields higher, contributes to a narrative that the BoJ is gradually moving toward additional normalization while still keeping financial conditions supportive.
At the same time, Ueda’s reiteration that there is no change in the foundational approach to bond tapering and his reluctance to preannounce emergency Japanese Government Bond (JGB) tools point to a preference to avoid excessive market volatility while preserving policy flexibility. For foreign exchange markets, the combination of firmer inflation dynamics, the possibility of a steady rise in long-term yields if short-term rates move higher, and a focus on JGB market stability is seen as modestly constructive for the Yen, particularly if global risk appetite remains fragile in the face of Middle East-linked energy price risks.
Technical Overview: EUR/JPY Bias Stays Bearish Below Key Averages
From a technical perspective, EUR/JPY retains a bearish posture on the daily chart. The cross is trading under the 20-period Bollinger simple moving average and remains clearly below the 100-day simple moving average (SMA), underscoring a prevailing downward bias. Price action is also constrained beneath the upper Bollinger band, which further supports the negative tone.
The Relative Strength Index (14) stands at 42.80, indicating lackluster momentum without yet reaching oversold territory.
Key Technical Levels
| Level Type | Price / Zone | Description |
|---|---|---|
| Immediate Support | 176.52 | October 15 low and first notable downside target |
| Secondary Support | 175.80 (approx.) | Lower Bollinger band area where sellers may take profits |
| Near-term Resistance | 177.95-178.00 | 20-period Bollinger SMA and psychological band |
| Stronger Resistance | 180.10 (approx.) | Upper Bollinger band on the daily chart |
| Major Resistance | 182.75 | 100-day SMA; recovery above would be needed to ease broader downside pressure |
On the downside, the first notable support is the October 15 trough at 176.52. A further slide could bring the lower edge of the Bollinger band near 175.80 into focus, an area where short positions might look to realize gains.
On the upside, initial resistance is clustered between 177.95 and 178.00, where the 20-period Bollinger SMA converges with a psychological barrier. A more significant hurdle lies near the upper Bollinger band around 180.10. Beyond that, the 100-day SMA at 182.75 represents a key structural resistance level; a decisive move above it would be required to alleviate the prevailing bearish backdrop.
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