EUR/JPY price forecast after reaching a 4-year high in April

The Japanese yen’s decline was the main theme of the trading year so far. It fell against its peers on the back of the Bank of Japan’s policies diverging from the rest of the central banks in advanced economies.

Perhaps it was not the yen’s depreciation that was so important to traders, but its velocity. It literally melted, as seen in the chart below showing the EUR/JPY rising more than 1,500 pips in an almost vertical line.

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The move is visible on all JPY pairs, so the EUR/JPY was not unique. What is unique is the fact that the cross reached a 4-year high, trading at 140 for the first time since 2018.

EUR/JPY remains bullish while trading above 135

The technical picture looks bullish while the cross holds above 135. Bulls may argue that the market formed a bullish flag visible on the daily timeframe, and so many may want to stay on the long side for a move into the 147 area.

But the bullish flag pattern would be invalidated if the market drops below 135. The pressure would mount for a reversal toward the 130 area on such a move.

If the selling accelerates below, the 125 area is seen as the one providing major support.

All eyes are on the Bank of Japan’s monetary policy statement

The Bank of Japan is the only major central bank in the world that keeps its monetary policy loose. While other central banks have started to tighten their monetary policy or announced that they will, the Bank of Japan vowed to buy unlimited government bonds to keep yields down.

As such, the currency declined as investors fled the yen and invested in other currencies.

This week, the Bank of Japan is scheduled to release its monetary policy. Any remarks regarding the future of its yield curve control program would impact the JPY pairs dramatically.

Many traders were caught on the wrong side of the market and bought the JPY after Russia invaded Ukraine. The yen is a traditional safe-haven currency, but the Bank of Japan’s decision took everyone by surprise and explains the JPY meltdown.