The EUR/JPY cross loses ground near 185.25 during the early European session on Tuesday. The Japanese Yen (JPY) edges higher against the Euro (EUR) as traders continue to pile into safe-haven currencies amid US President Donald Trump’s renewed tariff threats against European allies over Greenland.
Meanwhile, Japan’s Prime Minister Sanae Takaichi on Monday called snap elections for February 8 and pledged a wave of measures to loosen fiscal policy. Takaichi’s plans to cut taxes and boost spending are raising doubts about the financial health of one of the world’s most indebted governments. This, in turn, could undermine the JPY and create a tailwind for the cross.
Technical Analysis:
In the daily chart, EUR/JPY holds well above the 100-day EMA at 179.43 to preserve a firm uptrend. Price presses the upper Bollinger Band at 185.45 as the bands widen, signaling robust momentum and expanding volatility. RSI at 61 is positive but not overbought, keeping bullish pressure in place. The upper band caps the near-term upside, while initial supports sit at the middle band at 184.00 and the 100-day EMA at 179.43.
Momentum remains favorable as price rides the upper envelope, and the widening Bollinger Bands highlight an active trend. A daily close beyond the upper band could extend the advance, while a pullback would be expected to hold above the lower band at 182.58 to maintain the bullish profile. RSI near 61 supports dip-buying over sustained corrections. A clear break below that lower band would shift risk toward a deeper retracement, though the broader bias stays positive while above the rising 100-day EMA.
(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.
