In early European trading on Thursday, the EUR/JPY pair was mostly unchanged, hovering around 184.75. There’s a heightened sense of cautiousness in the markets regarding potential currency interventions after Japan’s Finance Minister Satsuki Katayama noted that the country stands ready to act against significant currency fluctuations at any time.
Japan’s gross domestic product (GDP) growth for the first quarter exceeded expectations, clocking in at an annualized rate of 2.1%, surpassing the 1.7% forecast. This strong performance might bolster the Japanese yen (JPY) and act as a challenge for the EUR/JPY cross.
Conversely, there are hawkish sentiments from European Central Bank (ECB) officials that could push the euro (EUR) higher against the yen. ECB policymaker Joachim Nagel indicated that at the upcoming June meeting, the bank might need to respond to ongoing energy pressures from Iran and the persistent inflation risk.
A notable 85% of economists surveyed by Reuters anticipate a 25 basis point hike in ECB deposit rates, raising them to 2.25% in June—a significant jump from previous expectations before the April meeting.
Technical analysis:
Looking at the daily chart, EUR/JPY appears to be trading sideways above the 100-day simple moving average (SMA) but just below the 20-day Bollinger midline. This setup suggests a largely neutral near-term bias following a pullback from recent peaks. The Relative Strength Index (RSI) is around 47, which reflects a lack of direction rather than acute selling.
If the price moves upward, the initial resistance point is the Bollinger midband around 185.00. Should buying momentum increase, there’s a stronger resistance level near the May 12 high at 185.46, with another barrier seen at the upper Bollinger Band near 187.15. On the downside, the 100-day SMA at 184.32 acts as the first support, just above the May 7 low of 183.50. A critical support level is identified below the Bollinger Band at approximately 182.88; a significant breach here could lead to a deeper correction.
(The technical analysis in this story was assisted by AI tools.)
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is among the most traded currencies globally. Its valuation hinges not only on broader trends in Japan’s economy but also on factors like the Bank of Japan’s actions, the yield disparities between Japanese and U.S. bonds, and overall trader sentiment regarding risk.
One of the crucial roles of the Bank of Japan is to manage exchange controls, making its policies vital for the yen’s trends. The Bank of Japan sometimes intervenes directly in the currency markets, typically to devalue the yen, though political considerations often limit these interventions. The prolonged ultra-easy monetary policy from 2013 to 2024 has widened the gap between the Bank of Japan’s policy and those of other central banks, resulting in a weaker yen. However, a recent gradual easing of this approach has started to provide some support for the currency.
Over the last ten years, the Bank of Japan’s persistent ultra-easy monetary stance has diverged significantly from other major central bank policies, particularly that of the US Federal Reserve. This has created a noticeable gap between U.S. 10-year bonds and their Japanese counterparts, favoring the dollar. However, with the Bank of Japan’s intention to gradually shift its policy in 2024 and rate cuts from other central banks, this gap may start to close.
Often seen as a safe investment, the Japanese yen tends to attract more investment during market stress. In periods of uncertainty, investors generally view the yen as more stable and reliable, which can lead to an increased value against other, riskier currencies.
