EUR/JPY Price Forecast: The cross keeps bullish vibe, first upside target emerges above 162.50

EUR/JPY climbs to near 162.15 in Monday’s early European session, up 0.30% on the day.
The constructive view of the cross prevails above the key 100-day EMA with the bullish RSI indicator.
The immediate resistance level emerges at 162.55; the key support level to watch is in the 160.15-160.00 zone.

The EUR/JPY cross loses momentum to around 162.15 during the early European session on Monday. The encouraging news from China's stimulus measures announced over the weekend provides some support to the Asian equity markets, which undermine the safe-haven currency like the Japanese Yen (JPY). However, the rising bets that the Bank of Japan (BoJ) will raise its interest rates further might help limit the JPY’s losses.

Technically, the positive outlook of EUR/JPY remains in play as the cross is well-supported above the key 100-period Exponential Moving Average (EMA) on the 4-hour chart. The upward momentum is reinforced by the Relative Strength Index (RSI), which stands above the midline near 61.40, displaying bullish momentum in the near term.

The first upside target for the cross emerges at 162.55, the upper boundary of the Bollinger Band. Extended gains could see a rally to 163.22, the high of January 22. The additional upside filter to watch is the 164.00-164.10 zone, representing the psychological level and the high of January 24.

On the other hand, the crucial support level for EUR/JPY is located at the 160.15-160.00 region, the confluence of the round figure, the lower limit of the Bollinger Band and the low of March 13. Sustained trading below the mentioned level could see a drop to the next contention level at 159.68, the 100-period EMA, followed by 158.90, the low of March 10.

EUR/JPY 4-hour chart

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.