EUR/JPY Retains Bearish Structure After Brief Rebound

Key Moments

Technical Outlook for EUR/JPY

EUR/JPY recovered modestly after three straight days of declines, changing hands near 175.90 during Asian trading on Monday. Daily chart analysis shows the cross continuing to trade inside a descending channel, maintaining a clearly bearish technical stance.

The pair is holding below both the nine-period and 50-period Exponential Moving Averages, preserving a negative short-term bias. The shorter EMA remains positioned beneath the longer EMA, and price is still trading under both, indicating that any upside attempts are facing significant headwinds. At the same time, the 14-day Relative Strength Index is hovering around 33, reflecting subdued momentum without firmly entering oversold territory.

Key Support Zones

On the downside, EUR/JPY may challenge the 12-month trough at 175.10, which was set on October 23, followed by the lower boundary of the descending channel near 175.00. A clear break beneath this overlapping support region would pave the way for a move toward the area around the 15-month low at 169.72.

Upside Levels to Watch

On the topside, immediate resistance is located at the nine-day EMA at 176.69, followed by the upper edge of the descending channel around 178.60. Above that, the next notable ceiling aligns with the 50-day EMA at 179.38. A sustained move above this medium-term moving average would mark a shift toward a more constructive tone, potentially allowing EUR/JPY to probe the area around the all-time high at 187.95, which was recorded on April 17.

Market Backdrop: Yen Strength and Risk Sentiment

Yen dynamics and broader risk tone are also influencing the backdrop for yen crosses. Analysts at MUFG highlight that the Yen “has continued to trade at stronger levels at the end of this week encouraged by more risk-off trading conditions.” They add that USD/JPY “fell to a low overnight of 156.08 but has since risen back up towards the 157.00-level as the sell-off in Asian equity markets reversed,” underscoring the currency’s defensive bid amid shifting risk sentiment.

On the macro side, Deutsche Bank notes that “in Japan, September inflation rose as expected overnight, with core CPI accelerating to a nine-month high of +2.1% y/y and moving above the BoJ’s target, supported by higher energy costs and yen weakness.” According to the bank, the combination of firmer yen levels and core CPI above the Bank of Japan’s target underscores a market environment where risk-off flows and domestic price developments are both in focus.

Japanese Yen – Key Drivers

The article also reiterates several fundamental aspects that typically influence the Japanese Yen:

• The Japanese Yen (JPY) is one of the world’s most traded currencies, with its value primarily shaped by the Japanese economic outlook, Bank of Japan policy decisions, yield spreads between Japanese and U.S. bonds, and overall market risk sentiment.
• The Bank of Japan, which includes currency stability within its mandate, at times intervenes directly in foreign exchange markets, generally with the aim of curbing yen strength, although such actions are infrequent due to concerns from major trading partners.
• The BoJ maintained an ultra-loose monetary stance between 2013 and 2024, contributing to yen weakness as policy diverged from other major central banks. The gradual unwinding of this stance, alongside rate cuts abroad, has started to narrow yield differentials.
• Because the yen is widely treated as a safe-haven asset, it tends to benefit during episodes of financial stress, when investors seek perceived stability and reduce exposure to higher-risk currencies.