EUR/JPY stayed soft for a third session, trading near 185.80 in Asian hours on Monday, but it continued to hold above closely aligned nine-day and 50-day Exponential Moving Averages. Those gauges sit at 185.50 and 185.12 respectively, providing nearby dynamic support and keeping the broader tone constructive. Momentum indicators were steady: the 14-day Relative Strength Index was 55.33, pointing upward without implying overbought conditions as the cross consolidated below recent peaks.
On the daily chart, price action remained confined within an ascending triangle, with the upper boundary around 186.10. A clean move above that level would shift focus to the record high at 187.95, set on April 17. If the cross slips, support is seen first at 185.50, then 185.12 and the triangle’s lower edge near 185.00. A breakdown beneath the formation would open room towards 181.87, the five-month low from March 16, and then 180.81, the seven-month low.
Technical and Macro Backdrop
We are currently watching the EUR/JPY pair consolidate around 185.80, holding strong support above its nine-day EMA of 185.50. This stability is backed by a resilient Eurozone economy, where core inflation remains sticky at 2.5%. Derivative traders should prepare for a potential breakout as the pair remains coiled within a bullish ascending triangle.
Trading Strategy and Risk Management
We recommend derivative traders focus on buying call options with a strike price near 186.50, targeting the key April high of 187.95. Recent CFTC Commitment of Traders data shows net-short positions on the Japanese Yen are still heavily dominant, making a sudden upward squeeze highly likely. A clean break above the 186.10 resistance ceiling will likely trigger these buy stops and accelerate the rally.
On the downside, we advise placing stop-losses for long futures positions just below the 50-day EMA at 185.12. A break below the 185.00 support level would shift our bias, potentially sending the pair down toward the March low of 181.87. However, the wide interest rate differential between the ECB and the Bank of Japan continues to favor the carry trade for the coming weeks.
