The EUR/JPY exchange rate edged lower during early European trading on Friday, slipping to approximately 162.35. The minor decline in the currency pair reflects growing market expectations that the Bank of Japan (BoJ) may continue raising interest rates throughout 2025.
Driving the yen’s strength was a hotter-than-expected Consumer Price Index (CPI) inflation report released earlier in the day, which reinforced the view that tighter monetary policy from the BoJ is likely.
Technical Analysis: Long-Term Bullish Trend Holds, But Short-Term Caution Warranted
From a technical standpoint, EUR/JPY remains in a long-term uptrend, supported firmly by the 100-day exponential moving average (EMA) on the daily chart. This suggests that the broader bullish momentum is still intact.
However, the 14-day relative strength index (RSI) currently sits at 46.95, just below the neutral 50 line. This reading points to a lack of immediate bullish momentum, signaling a possible consolidation phase or near-term pullback in the cross.
Resistance Levels: Focus on 163.31 and 164.80
On the upside, the first key resistance level is identified at 163.31, the intraday high recorded on May 21. A sustained break above this barrier could attract further buying interest, with the next target located near 164.80, which aligns with the upper Bollinger Band.
Beyond this, the 166.00 mark stands as a psychological resistance and represents the multi-month high last seen on November 7, 2024.
Support Levels: Watch 161.88 and 160.00
In terms of downside risks, initial support is found at 161.88, the zone of the 100-day moving average. A drop below this level may expose the pair to further weakness, possibly heading toward 161.33, the lower boundary of the Bollinger Band.
If selling pressure persists, the next significant level to monitor is the 160.00 psychological support, which could act as a key pivot point in determining the medium-term direction of the pair.
Outlook: Yen Supported by Fundamentals, Euro Faces Resistance
The near-term outlook for EUR/JPY remains mixed. While technical indicators suggest a continued bullish structure, fundamental drivers—especially from the Japanese side—are tilting in favor of the yen due to rising inflation and anticipated monetary tightening by the BoJ.
Unless eurozone fundamentals shift significantly or the BoJ unexpectedly changes course, the yen could continue gaining ground in the short term, keeping EUR/JPY under pressure below key resistance levels.
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