The EUR/JPY currency pair has gained momentum in early trading, gathering strength near 172.60 during Monday’s Asian session, up approximately 0.20% on the day. The technical outlook remains constructive as the pair continues to benefit from a risk-on market sentiment, alongside ongoing uncertainty regarding the Bank of Japan’s (BoJ) interest rate policy.
Liam Gerald, a broker at AureliusHub, provides a comprehensive breakdown of this topic in this article.
Technical Overview
From a technical perspective, the EUR/JPY cross is well-supported above the 100-day Exponential Moving Average (EMA), which serves as a critical trend indicator for medium-term market participants. The 14-day Relative Strength Index (RSI) stands around 58.00, indicating bullish momentum in the near term and suggesting that further upside remains feasible.
The immediate resistance level is observed near 173.00, corresponding to the high of August 13 and a significant psychological barrier for traders. Should the pair maintain trading above this threshold, the next target could be 173.50, representing the upper boundary of the Bollinger Band, followed by 173.90, the July 28 high. These levels are likely to attract buy orders from short-term momentum traders and swing traders looking to capitalize on the risk-on environment.
On the downside, the support structure begins at 171.51, marking the low of August 15. A breakdown below this level could expose the cross to further weakness, with the next contention point at 170.35, the lower boundary of the Bollinger Band. If selling pressure intensifies, the 170.00 round number could emerge as a key psychological support.
Market Drivers
Several fundamental factors are influencing EUR/JPY’s price action. The ongoing risk-on sentiment in global markets has placed pressure on the Japanese Yen (JPY), which typically benefits from safe-haven flows.
Meanwhile, the European Central Bank (ECB) policy outlook remains a focal point, with ECB President Christine Lagarde scheduled to speak later on Wednesday. Any commentary from the ECB could act as a catalyst for further moves in the pair, particularly if it signals a hawkish bias or outlines monetary policy intentions.
The uncertainty over the BoJ’s next rate hike is also playing a role in shaping trader expectations. Market participants are weighing the probability of additional monetary stimulus adjustments, which have historically weakened the JPY against higher-yielding currencies such as the Euro (EUR).
Chart Analysis
The daily chart highlights a constructive outlook for EUR/JPY, with the pair consistently trading above the 100-day EMA, indicating that the medium-term trend remains bullish. The RSI reading above 50 reinforces the upside bias, signaling that momentum is currently favoring buyers.
Bollinger Bands show that the upper limit near 173.50 serves as a potential profit-taking zone, while the lower band at 170.35 acts as a buffer against extreme downside. Traders often use these volatility-based indicators to gauge potential entry and exit points, particularly in a market environment influenced by risk sentiment and central bank commentary.
Short-Term Outlook
In the short term, EUR/JPY appears poised to maintain its bullish trajectory as long as it stays above 172.50, a level that has become a key pivot point for intraday traders. The risk-on environment, combined with technical support from the 100-day EMA, suggests that the pair could challenge 173.00 in the coming sessions.
Sustained buying pressure beyond this resistance zone may open the door for a move toward 173.50–173.90, targeting both the upper Bollinger Band and historical resistance levels.
Conversely, a failure to hold 171.51 could prompt a retest of the lower Bollinger Band at 170.35, with potential downside toward the 170.00 psychological level. Traders should closely monitor price action around these levels, as breaches could indicate a shift in market sentiment and trigger stop-loss orders, accelerating moves in either direction.
Conclusion
Overall, the EUR/JPY price forecast remains positive above 172.50, supported by technical indicators, risk-on sentiment, and fundamental factors such as BoJ uncertainty and upcoming ECB commentary. Key levels to watch include 173.00 as the immediate resistance, with potential upside targets at 173.50–173.90, while 171.51 serves as the first support, followed by 170.35 in a bearish scenario.
Market participants are advised to monitor technical and fundamental developments closely, as the EUR/JPY cross is currently navigating a critical zone that could define near-term trends. The combination of momentum indicators, moving averages, and volatility bands provides a robust framework for assessing entry and exit points in this actively traded currency pair.
