The EUR/JPY cross trades on a flat note near 183.80 during the early European session on Wednesday. Earlier this week, the Bank of Japan’s (BoJ) December meeting “Summary of Opinions” showed several board members advocating for a continued tightening path and additional rate hikes in 2026. The Japanese Yen (JPY) initially strengthened against the Euro (EUR) following the report. However, traders have been disappointed with the slow and cautious pace of the BoJ’s monetary tightening, which might cap the upside for the JPY.
On the other hand, the European Central Bank (ECB) held interest rates steady in December and hinted that they are likely to remain unchanged for a period. The money markets have priced in for a 25 bps interest rate cut by the ECB in February 2026, currently remaining below 10%. Financial markets are expected to trade on thin volumes later in the day. Japanese markets are closed for the rest of the week, and most markets closed on Thursday for the New Year’s Day holiday.
Technical Analysis:
In the daily chart, EUR/JPY preserves an uptrend above the rising 100-day EMA at 177.80, which underpins the broader bullish bias. Pullbacks would need to hold above this average to maintain upward traction.
Price hovers just below the upper Bollinger Band, with bands gently widening and pointing higher, signaling firm bullish pressure. RSI prints 61.05 and edges up from 60.87, confirming positive momentum without overbought conditions. Immediate resistance stands at the upper band at 185.25, while support aligns at the middle band at 182.95, with a deeper cushion at the lower band at 180.65. A daily close above resistance would pave the way for continuation, whereas a rejection could trigger consolidation toward the midline.
(The technical analysis of this story was written with the help of an AI tool)
Japanese Yen FAQs
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.
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.
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.
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.