EUR/JPY Price Forecast: Edges Lower Below 185.00, Near-Term Bullish Bias Remains Intact

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EUR/JPY Price Forecast: Edges Lower Below 185.00, Near-Term Bullish Bias Remains Intact

The EUR/JPY cross edged lower in early European trading on Thursday, slipping below the 185.00 psychological handle as the Japanese yen found modest support. Despite the intraday pullback, the near-term technical outlook for the pair remains cautiously bullish, with buyers defending key support levels near the 184.50 zone.

Technical Levels in Focus

The pair is currently trading around 184.80, down approximately 0.2% on the day, after failing to sustain gains above the 185.00 mark. The immediate resistance sits at 185.20, the recent swing high, followed by the 185.50 area. On the downside, initial support is seen at 184.50, with a break below that exposing the 184.00 level and the 50-day simple moving average near 183.70.

The Relative Strength Index (RSI) on the daily chart has eased from overbought territory but remains above 50, indicating that bullish momentum, while fading, has not yet reversed. The Moving Average Convergence Divergence (MACD) indicator shows a bearish crossover on the hourly chart, suggesting the pullback could extend in the short term before buyers step in again.

Market Drivers Behind the Move

The Japanese yen strengthened broadly after comments from Bank of Japan (BoJ) board members reinforced expectations of a gradual policy normalization. Meanwhile, the euro struggled for direction amid mixed eurozone economic data and a cautious tone in equity markets. The combination of a slightly firmer yen and profit-taking after recent euro gains weighed on the cross.

Traders are now looking ahead to eurozone inflation data due later this week, which could influence European Central Bank (ECB) rate expectations and provide fresh impetus for EUR/JPY. Any upside surprise in inflation could support the euro, while a weaker reading might accelerate the current pullback.

What This Means for Traders

For short-term traders, the pullback below 185.00 offers a potential re-entry point for bullish positions if support at 184.50 holds. A sustained break above 185.20 would signal renewed buying interest and open the path toward 185.50 and beyond. Conversely, a daily close below 184.00 would negate the near-term bullish bias and shift focus to the downside.

Longer-term, the trend remains constructive as long as the pair stays above the 183.00 region, which aligns with the 100-day moving average. The broader macroeconomic backdrop—diverging monetary policy paths between the ECB and BoJ—continues to favor the euro over the yen, but traders should remain vigilant for sudden shifts in risk sentiment.

Conclusion

EUR/JPY is experiencing a healthy correction after recent gains, with the near-term bullish bias still intact above 184.50. The outcome of upcoming eurozone inflation data and BoJ commentary will likely determine whether the pair resumes its uptrend or deepens its pullback. Traders should monitor key technical levels and manage risk accordingly.

FAQs

Q1: What is the key support level for EUR/JPY right now?
The immediate support is at 184.50, followed by 184.00 and the 50-day SMA near 183.70. A break below these levels would weaken the bullish outlook.

Q2: Why did EUR/JPY fall below 185.00?
The decline was driven by a modest strengthening of the Japanese yen after BoJ comments reinforced expectations of policy normalization, combined with profit-taking after recent euro gains and cautious market sentiment.

Q3: Is the bullish trend for EUR/JPY still valid?
Yes, the near-term bullish bias remains intact as long as the pair holds above 184.50. The broader trend is still constructive above the 183.00 region, supported by the ECB-BoJ policy divergence.

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