Euro-Yen Rises, But Technical Signals Still Favor Further Weakness

Key Moments

EUR/JPY Holds Higher, But Upside Seen as Limited

The EUR/JPY cross was trading slightly higher around 176.65 in early European hours on Monday. The pair remained in positive territory, but signals from the Bank of Japan (BoJ) suggested that further gains could be constrained.

The BoJ kept interest rates unchanged last month, while stressing its determination to address inflation risks. This stance supported market expectations that the central bank could raise rates in December. Minutes from the BoJ’s September meeting, released on Thursday, showed that most policymakers considered additional rate increases appropriate as underlying inflation moved closer to the 2% target.

Reinforcing this view, former BoJ chief economist Seisaku Kameda said on Friday that the central bank is expected to raise rates in December and then continue lifting borrowing costs next year until they reach 2% in response to increasing inflation pressures.

JPY Seen as Standout Hedge Amid AI-Driven Volatility

Analysts at OCBC pointed out that the Japanese Yen has been the notable outperformer in recent sessions, stating that “the standout has been the JPY.” They argued that the currency’s recent strength “reinforces its value as a hedge against a reversal in the US-centric AI trade,” even though “it is probably too early to expect sustained JPY gains purely on AI concerns.”

Looking further ahead, OCBC indicated that “more frequent US-centric AI volatility in 2027 could strengthen its hedge appeal,” especially as the “AI sell-off is creating competing forces for the USD.” According to their assessment, “falling US yields are blunting the USD’s safe-haven appeal, leaving the JPY as the standout hedge against more US-centric volatility.”

Beyond developments around AI, OCBC also highlighted domestic Japanese capital flows as another potential driver. They cited “Japanese portfolio rebalancing” as “the other potential JPY catalyst,” and said markets will closely watch “GPIF’s July-September results for signs of a shift towards domestic assets.” OCBC noted that “if GPIF and other Japanese investors bring more money home or increase FX hedging on overseas assets, an important source of structural JPY selling could fade,” adding that “GPIF flows could provide another tailwind for the JPY.”

Technical Picture: EUR/JPY Still Below 100-Day SMA

On the daily chart, EUR/JPY continues to display a bearish short-term bias, with spot trading below the 100-day Simple Moving Average and under the middle line of the Bollinger Bands. Price action remains in the lower half of the Bollinger Bands range, with the lower band serving as the immediate reference on the downside. The Relative Strength Index stands at 44.39, indicating weak momentum but not yet signaling oversold conditions.

On the upside, initial resistance is aligned with the middle Bollinger band near 176.80. Above that, the next resistance level is located at the upper Bollinger band around 178.30. A sustained break beyond 178.30 could open the path to the 180.00 psychological barrier, followed by the 100-day SMA at 181.50.

On the downside, the November 2 low at 175.70 is the first key support to watch, followed by the lower Bollinger band at 175.30. A clear move below 175.30 would likely expose the October 6, 2025 low at 174.74.

The technical analysis in this report was prepared with the assistance of an AI tool, as disclosed in the original article.

The article was corrected on November 9 at 04:55 GMT to clarify in the first bullet point that EUR/JPY was trading with mild gains near 176.65 in Monday’s early European session, rather than the Asian session.