EUR/JPY is seeing an upward trend, recovering from a two-day decline to trade near 172.40—its highest since July 17, 2024. The bullish technical outlook remains, with RSI at 72.85 indicating overbought conditions without reversal signs.
The Euro gains momentum against a weaker Japanese Yen, benefitting from notable policy divergence between the ECB and BoJ. The cross reached a new yearly high, up 0.67% on the day, driven by Yen weakness and continued bullish movement.
Ecb And Boj Policy Divergence
The ECB is cutting rates as inflation approaches the 2% target. While open to ending rate cuts, uncertainties around global trade remain. In contrast, the BoJ maintains its 0.50% rate and slowly reduces JGB purchases, focusing on a healthy wage-price cycle, boosting EUR/JPY.
Technically, the cross ascends past 172.40, supported by the 20-day SMA at 169.42, maintaining bullish momentum without immediate reversal signals. RSI at 72.85 and ADX at 43.72 point to a strong upward trend.
Support levels are at 170.00 and 169.50, with an upside possibility to test the 173.00-174.00 range. This framework underlines a sustained positive bias, as long as support holds.
Trend Analysis And Projections
We’re looking at a pair trading very close to its highest level seen in over a year, with price action grinding higher despite the earlier slips this week. What this shows is a clear directional push, driven largely by disparities between the two central banks’ approaches. The Relative Strength Index (RSI), which measures how far price has moved from a typical mean, is nearing 73—overbought, yes, but importantly, not yet showing any divergence or loss of traction. This means momentum is still stretching, and that’s not always where reversals begin.
Visibly, the Euro continues to gain against the Yen, and not by accident—there’s groundwork tied back to policy stances. The Bank of Japan, still operating under loose conditions, appears deliberate in taking its time to unwind stimulus. Meanwhile, Frankfurt’s more hawkish pivot has softened just slightly, but not enough to dilute the rate advantage the Euro enjoys. This advantage widens the yield gap, and that’s feeding directly into price action.
From a technical perspective, current levels above 172.40 confirm that buyers are willing to sustain higher bids without much retracement. That tells us something about conviction. We’ve also seen the pair remain comfortably above its 20-day simple moving average, lending further weight to the persistent upward push. The average directional index (ADX) supports the strength of the move—readings north of 40 rarely occur in chop-driven markets.
Support around 170.00 and lower at 169.50 helps us frame risk. These are obvious reference points to monitor, particularly as price approaches the next upside hurdle between 173.00 and 174.00. The range ahead lacks immediate congestion, rounding out a picture where pullbacks would still sit within a broader upward structure, at least for now.
Given the conditions—clear trend, policy divergence creating asymmetry in flows, firm technical structure—we lean towards further testing of higher levels before signs of exhaustion appear. Sharp counters aren’t in place yet, and that reduces the likelihood of sudden flips in sentiment unless macro data surprises from either region. For now, medium-term momentum stays intact above 170.00.
