EUR/JPY edged off its session low on Friday but stayed lower, even as the Euro rose against the US Dollar. The move followed a weak US employment report that drove the Yen higher early in the American session, while lingering sensitivity after last week’s coordinated Yen-buying intervention by Japan and the United States kept participants wary of selling the Japanese currency. The US Dollar fell over 1% against the Yen in early US trade, and the Yen remains well clear of the 40-year low seen in July. German industrial and trade data failed to provide support, while the European Central Bank kept rates unchanged and markets are priced for only one further hike this year, with a smaller chance of a second.
Geopolitical risk added to the backdrop after Iran’s parliament speaker and negotiator Mohammad Bagher Ghalibaf criticised US policy on Thursday, as a draft plan reported by Fars suggested US and Israeli ships could be barred from the Strait of Hormuz. Any prolonged disruption would complicate Japan’s energy import bill and worsen terms of trade, a factor previously tied to Yen weakness. Technically, EUR/JPY was around 182.00, below the 20-period SMA at 182.17 and the 100-period SMA at 184.70, with RSI near 41; resistance sits at 182.13, then 182.17 and 182.69, while support is at 181.76 and 181.30.
Options and Intervention Risk
We advise derivative traders to brace for sharp fluctuations in the EUR/JPY pair in the coming weeks as it hovers around the 182.00 threshold. Following the weak U.S. jobs data and the looming threat of joint Tokyo-Washington intervention, we recommend using short-term put options to protect against sudden Yen rallies. Historical data shows that Japanese unilateral and bilateral actions can trigger massive currency shifts, similar to the record 9.8 trillion yen spent by Japan’s Ministry of Finance during its previous market operations.
Technical Levels and Trade Strategy
From a technical perspective, we should closely watch the immediate resistance zone between 182.13 and 182.17. If the pair remains capped below this level, trading strategies like bear put spreads could yield strong results as we target the key support floor at 181.30. Conversely, any sustained breakout above the 100-period moving average at 184.70 would require us to quickly abandon bearish setups and pivot to call options.
We also need to consider that Japan imports more than 90% of its energy requirements, meaning rising crude oil costs will continue to damage its terms of trade. While the European Central Bank’s cautious stance keeps the Euro relatively stable, high energy bills will structurally limit how much the Yen can recover in the long run. Therefore, we suggest maintaining a flexible, short-duration trading profile rather than holding heavy, long-term directional bets on the Yen.
