EUR/JPY Price Forecast: Retreats below 176.00 following a bullish opening gap

• The 12-month low at 175.10 remains a potential test for EUR/JPY.
• With the 14-day Relative Strength Index close to 33, momentum remains weak.
• At 176.69, the nine-day EMA presents the first barrier.

Trading near 175.90 in Monday’s Asian session, EUR/JPY is recovering after three consecutive days of declines. Despite the advance, the daily chart places the cross inside a descending channel, pointing to a continued bearish bias.

Below both its nine- and 50-period Exponential Moving Averages (EMAs), EUR/JPY retains a bearish short-term outlook. The shorter EMA sits beneath the longer one, and the price remains below both, suggesting that recovery attempts are still restricted. Meanwhile, a 14-day Relative Strength Index (RSI) reading of around 33 points to persistent momentum weakness rather than outright oversold conditions.

A potential test of the 12-month low of 175.10, recorded on 23 October, would bring the descending channel’s lower boundary around 175.00 into focus next. Should EUR/JPY fall through this area of converging support, the cross would have scope to approach the region of its 15-month low at 169.72.

For any recovery, the nine-day EMA at 176.69 provides the initial hurdle, ahead of the descending channel’s upper boundary near 178.60. Beyond that, the 50-day EMA at 179.38 offers further resistance. A break above this medium-term moving average would trigger a bullish reversal, supporting a move by EUR/JPY towards the area around its all-time high of 187.95, set on 17 April.

Yen strengthens as Japanese inflation exceeds BoJ target and risk aversion lingers

According to analysts at MUFG, the Yen “has continued to trade at stronger levels at the end of this week encouraged by more risk-off trading conditions.” The analysts also report that USD/JPY “fell to a low overnight of 156.08 but has since risen back up towards the 157.00-level as the sell-off in Asian equity markets reversed,” highlighting demand for the currency’s defensive qualities as risk sentiment shifts.

On the inflation backdrop, Deutsche Bank observes that “in Japan, September inflation rose as expected overnight, with core CPI accelerating to a nine-month high of +2.1% y/y and moving above the BoJ’s target, supported by higher energy costs and yen weakness.” With the Yen firmer and core CPI above target, the market continues to weigh risk-averse flows against changes in domestic price pressures.

(The technical analysis of this story was written with the help of an AI tool. Know more.)