Insights 
VT 
The EUR/JPY cross hovers at 175.65 in early European trading on Monday. The current outlook remains positive, with upward movement supported by a 14-day RSI above 56.85 and the price holding above the 100-day EMA.
Resistance Levels And Targets
Resistance for EUR/JPY is situated between 176.90 and 177.00, which aligns with the October 13 high. A sustained move beyond this could propel the price towards targets at 178.00 and, subsequently, 178.50.
On the downside, the first support level lies at 174.82, the October 17 low. Falling below this mark risks further decline to 172.35 and potentially 171.25.
The Japanese Yen faces pressure due to anticipated policy continuity favouring easy monetary conditions. A further BoJ rate raise delay could weigh on the Yen, enhancing EUR/JPY.
The upcoming German PPI release, alongside Japan’s PM selection, will influence Japanese and Eurozone economic sentiments. Sanae Takaichi’s expected election as PM fosters market optimism for expansive fiscal measures and ongoing policy easing.
Impact Of ECB And BoJ Policies
The Yen’s value correlates with BoJ policies, US-Japan yield differences, and global risk sentiment. Historically, the Yen depreciated with ultra-loose policies (2013-2024), but recent gradual policy shifts may offer support.
The EUR/JPY is holding a bullish stance above 175.50 as we start the week. We see the market pricing in Sanae Takaichi becoming Japan’s next Prime Minister, which strongly suggests a continuation of loose monetary policy. This fundamental outlook is keeping downward pressure on the Yen, favoring the cross.
We note that Japan’s latest national Core CPI for September came in at 1.8%, dipping further below the Bank of Japan’s 2% target. This data gives the expected new leadership plenty of reason to delay any significant interest rate hikes, reinforcing the weak Yen narrative. Traders are therefore increasingly comfortable betting against the Yen for the foreseeable future.
In contrast, European Central Bank officials have continued to signal a hawkish hold, as Eurozone core inflation remains sticky above 3%. This policy divergence is widening the spread between German and Japanese 10-year government bonds, which now exceeds 360 basis points. The carry trade favoring the Euro over the Yen remains highly attractive under these conditions.
For derivative traders, this environment supports buying call options on the EUR/JPY or constructing bull call spreads to limit costs. We see the 177.00 level as the first major resistance, with a sustained break opening the door to our next target of 178.00. Using options allows us to capitalize on this expected upward move while defining our risk.
We must also manage risk, especially remembering the Yen’s sharp but brief recovery spells back in 2024 when policy shifts were first announced. A decisive break below the 174.82 support level would be our first warning sign that the trend is faltering. Prudent traders might consider buying cheap, out-of-the-money puts as a hedge against an unexpected policy reversal or a shift in market sentiment.
