The EUR/JPY cross is experiencing a slight pullback during Wednesday’s early European session, with the pair hovering around the 164.40 level. Despite this minor retracement, the overall technical outlook remains bullish, supported by key levels and indicators that suggest further upside potential.
As we examine the current price action and the broader market dynamics, it becomes evident that EUR/JPY remains well-positioned for potential gains, provided it holds above key technical thresholds. In their article, Vestronmix offers a thorough breakdown of the topic.
Market Overview and Key Events
On Wednesday, the Japanese Yen (JPY) showed some strength against the Euro (EUR), partially driven by expectations that the Bank of Japan (BoJ) may continue its policy normalization efforts. This speculation has been a contributing factor to the Yen’s recent strengthening, particularly in the short term.
Moreover, market participants are keeping a close eye on German Harmonized Index of Consumer Prices (HICP) data, which is set to be released later in the session. This inflation data will play a critical role in determining future interest rate decisions by the European Central Bank (ECB), which could influence the EUR/JPY cross in the coming days.
Volatility and Market Positioning
Additionally, volatility levels in the EUR/JPY cross remain moderate, offering a favorable environment for trend-following strategies. With the pair consolidating just below the 165.00 resistance, traders may look for a bullish breakout pattern supported by volume expansion to confirm further upside.
If accompanied by positive macroeconomic data from the Eurozone or dovish signals from the BoJ, such a move could accelerate buying pressure. Meanwhile, options activity around the 165.00–166.00 strike range indicates increased interest in upside protection, suggesting that market participants are positioning for potential gains in the near term.
Technical Outlook: Bullish Above 100-Day EMA
From a technical standpoint, the overall structure for EUR/JPY remains bullish as the pair continues to trade above the key 100-day Exponential Moving Average (EMA), which provides important support for the cross. The 100-day EMA has been a pivotal level in determining the longer-term trend, and the fact that the pair is holding above this level reinforces the positive bias.
Further bolstering the bullish case for EUR/JPY is the 14-day Relative Strength Index (RSI), which is positioned comfortably above the midline at 58.30. An RSI reading above 50 typically suggests that the pair is in a bullish trend and that upward momentum remains intact. As long as the RSI stays above the 50 level, the bullish outlook will remain in play.
Key Resistance and Support Levels
Looking ahead, EUR/JPY faces some critical levels that will dictate the future price action.
Resistance: The first significant upside barrier to watch is the 165.00 level. This represents not only a key psychological level but also aligns with the upper boundary of the Bollinger Band on the daily chart. A break above 165.00 could spark a strong bullish momentum, as the market would likely test the round number of 166.00, which is also the high from November 7, 2024.
If the price manages to breach 166.00, the next major hurdle is seen at 166.60, the high from October 30, 2024. This zone around 166.00–166.60 will likely act as strong resistance, where further upward movement could encounter headwinds.
Support: On the downside, the 163.51 level, marked by the low of May 12, provides initial support for EUR/JPY. A retest of this support could offer an opportunity for bargain hunters to step in, particularly if the 100-day EMA holds firm as support.
However, if the price fails to maintain support at 163.51, the next downside target is the 161.80 level, which is in line with the 100-day EMA. A break below this level would raise concerns about a deeper corrective move, with the 160.00 psychological mark coming into focus as a potential next support.
Outlook and Market Sentiment
The sentiment in the EUR/JPY market remains cautiously optimistic, with bullish momentum still dominating in the near term. As long as the pair holds above the 100-day EMA and the RSI remains in bullish territory, the outlook for further upside remains intact.
However, traders will need to monitor the economic data releases, particularly the HICP figures from Germany, as they could have a direct impact on Eurozone inflation expectations and, by extension, the EUR/JPY cross. The Bank of Japan’s policy stance will also continue to influence the Yen, making it essential to stay informed on any shifts in Japan’s monetary policy.
Conclusion
EUR/JPY remains in a bullish trend as long as the pair holds above critical support levels, especially the 100-day EMA. A break above 165.00 could open the door for further gains, targeting 166.00 and 166.60. On the downside, 163.51 and 161.80 serve as key support zones to watch for any signs of a potential reversal.
