EUR/JPY snapped a three-day losing streak with a 0.56% rise on Tuesday, trading near 181.90. The move followed intervention in FX markets by US and Japanese authorities that strengthened the Japanese Yen against its counterparts, but the rebound failed to change the broader tone.
After last week’s intervention, the cross shifted from bullish to range trading with a mild downward tilt, having previously cleared the 200-day Simple Moving Average. The Relative Strength Index is falling towards oversold territory, keeping downside risks in focus: a break below 180.00 would open 179.30, the August 3 cycle low, before 178.82, the October 30, 2025 high. On the upside, a push above 182.00 would bring 183.00 into view, with the 200-day SMA at 183.74 beyond that.
Technical Outlook and Trading Strategy
We believe derivative traders should prepare for further downside in the EUR/JPY pair as the recent rebound struggles to break key resistance. With the pair trading around 181.90, just below the 200-day Simple Moving Average of 183.74, the overall momentum remains firmly with the sellers. Traders should look to establish short positions or purchase put options, targeting a break below the psychological support level of 180.00.
If sellers successfully push the market below 180.00, we expect the next targets to be the recent August 3 cycle low of 179.30 and the October 30, 2025 high of 178.82. The Relative Strength Index is currently declining toward oversold territory, which supports this bearish outlook. However, a clean break above 182.00 would invalidate this short-term bearish bias and could push the pair back toward 183.00.
Fundamental Drivers and Risk Management
This downward pressure is heavily driven by fundamental shifts, specifically the narrowing yield spread between European and Japanese bonds. While the European Central Bank has continued its rate-cutting cycle, the Bank of Japan has gradually normalized its monetary policy, keeping the 10-year Japanese Government Bond yield elevated near 1.1%. This narrowing yield gap makes the Japanese Yen far more attractive, reducing the appeal of the traditional euro-yen carry trade.
Recent joint interventions by global monetary authorities have also introduced high volatility, giving the Yen a strong safe-haven boost. Historically, aggressive market interventions of this scale tend to create lasting shifts in sentiment, much like the major currency interventions seen during the volatile periods of 2024. We advise using tight stop-losses near the 200-day SMA of 183.74 to manage risk against sudden counter-trend spikes.
