The EUR/JPY currency cross remains firmly in focus for traders and technical analysts, holding on to its bullish bias above the crucial 166.00 level during Thursday’s early European trading session. Despite experiencing mild selling pressure near 166.35, the pair continues to exhibit signs of strength, underpinned by solid technical indicators and a relatively constructive market structure.
In this comprehensive guide, Fletrade’s broker, Gustaf Horsholt, explores the factors that define and influence the topic.
Technical Overview: Bullish Momentum Intact
From a technical analysis standpoint, the EUR/JPY pair maintains a positive trajectory on the daily chart, largely supported by the price’s position above the 100-day Exponential Moving Average (EMA), a widely-watched dynamic support line that often signals the underlying trend direction. Currently, the 100-day EMA sits near the 162.88 level, well below the current market price, further emphasizing the bullish structure.
The 14-day Relative Strength Index (RSI) stands at 62.00, decisively above the neutral 50 threshold. This reading points to sustained bullish momentum without flashing overbought signals, leaving room for potential upside extension.
Adding to the constructive setup, price action remains inside the Bollinger Bands, with the upper band approaching 167.85, signaling possible resistance zones should upward momentum accelerate.
Resistance Levels to Monitor
The immediate resistance level to watch lies at 167.62, which corresponds to the swing high registered on June 17. A clean breakout above this level would likely trigger a renewed wave of bullish interest, with potential for a push toward the upper Bollinger Band boundary at 167.85.
Should this level give way, the next significant resistance to watch would be the psychological 170.00 mark, a major round number and potential profit-taking zone. Such a move would mark a significant continuation of the pair’s medium-term bullish trend and suggest broader euro strength relative to the Japanese yen.
Support Levels and Downside Risks
Despite the prevailing bullish bias, traders must remain vigilant of key support zones that could come into play if selling pressure intensifies. The initial support area is defined by the 166.05–166.00 range. This zone not only represents the low of June 16, but also marks an important round-figure psychological support.
A decisive break below this support zone could shift the short-term narrative and lead to a deeper pullback toward 164.22, which marks the low of June 6. Should bearish sentiment dominate, the ultimate level of contention would be found at 162.88, the 100-day EMA, serving as a critical structural floor in the current trend setup.
Market Sentiment and Fundamental Influences
From a fundamental perspective, some of the recent yen strength can be attributed to geopolitical tensions in the Middle East, which have sparked mild risk-off flows, thereby supporting the JPY, traditionally viewed as a safe-haven currency.
Moreover, traders are keeping a close eye on upcoming Japanese macroeconomic data, particularly the May National Consumer Price Index (CPI) figures and the Bank of Japan (BoJ) Monetary Policy Meeting Minutes, both scheduled for release on Friday.
These events are likely to inject volatility into JPY crosses, including EUR/JPY, depending on how they influence market expectations around future BoJ policy adjustments.
That said, the Euro remains resilient, benefiting from expectations that the European Central Bank (ECB) will adopt a measured pace in any potential monetary policy shifts, especially in light of still-elevated core inflation metrics across the Eurozone.
Trading Strategy
Given the combination of technical strength and solid macroeconomic backdrop, the EUR/JPY pair is currently best approached with a buy-on-dips strategy, particularly for intraday and swing traders. As long as the pair remains above 166.00, bullish setups are favored, with a primary upside target of 167.62, followed by 167.85 and 170.00 on extended strength.
Conversely, should the pair fall below 166.00, a short-term shift to neutral or bearish bias may occur, necessitating a reassessment of exposure and risk management. However, until such a breakdown is confirmed, the overall technical outlook remains tilted in favor of the bulls.
Conclusion: Bias Favors the Upside
In summary, EUR/JPY retains its bullish outlook above 166.00, with technical indicators, moving averages, and price action all reinforcing the current uptrend. While geopolitical risks and upcoming BoJ-related releases introduce some event-driven risk, the pair is structurally supported, both technically and sentiment-wise.
As always, traders are encouraged to combine both technical and fundamental insights to navigate potential volatility and maintain a disciplined approach amid changing market dynamics.
