- EUR/JPY trades in positive territory to around 160.75 in Friday’s early European session.
- The cross keeps the negative view below the 100-period EMA with the bearish RSI indicator.
- The key downside target to watch is 160.00; the immediate resistance level emerges near 161.90.
The EUR/JPY cross gains momentum to around 160.75, snapping the two-day losing streak during the early European session on Friday. The positive risk tone undermines a safe-haven currency like the Japanese Yen (JPY) against the Euro (EUR). However, the downside for the JPY might be limited as the hotter consumer prices in Tokyo keep hopes alive for further Bank of Japan (BoJ) policy tightening.
According to the 4-hour chart, the bearish outlook of EUR/JPY prevails as the cross is below the key 100-period Exponential Moving Average (EMA). The downward momentum is reinforced by the Relative Strength Index (RSI), which stands below the midline near 40.70, supporting the sellers in the near term.
The crucial support level for the cross is seen at 160.00, representing the psychological level and the lower limit of the Bollinger Band. Any follow-through selling below the mentioned level could see a drop to 159.11, the low of December 19, 2024. Further south, the next contention level to watch is 158.65, the low of December 11.
The first upside barrier for EUR/JPY emerges near 161.90, the 100-period EMA. A decisive break above this level could pave the way to 163.00, the upper boundary of the Bollinger Band. Extended gains could see a rally to the next hurdle at 164.08, the high of January 24.
EUR/JPY 4-hour chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
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.
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