The Japanese Yen (JPY) is drawing significant attention as market participants anticipate the Bank of Japan’s (BOJ) upcoming policy review in about a month. This review could signal a shift towards a more hawkish stance in 2025, potentially impacting Yen valuations. Despite this anticipation, Yen weakness has been a persistent theme across various currency pairs. This analysis will delve into the technical outlook for EUR/JPY, alongside USD/JPY and GBP/JPY, to assess potential trading opportunities, with a particular focus on scenarios favoring Yen strength against the Euro.
While USD/JPY continues to mirror broader US Dollar (USD) movements, and GBP/JPY exhibits its own unique dynamics, EUR/JPY presents a compelling case for bearish potential, aligning with scenarios where Yen strength is anticipated. This is particularly relevant given the upcoming BOJ policy review which may introduce a hawkish pivot. Let’s examine each of these pairs in detail.
USD/JPY: Tracking Dollar Strength at Key Fibonacci Levels
The US Dollar encountered considerable resistance around the 107.00 level last week, leading to a brief pullback in the early part of this week. However, a resurgence of bullish momentum this morning has propelled the Dollar back towards this resistance zone. USD/JPY has closely mirrored this USD strength, suggesting potential opportunities for Yen weakness if the Dollar breaks through resistance and extends its upward trajectory beyond its two-year range.
Currently, USD/JPY’s price action is significantly influenced by Fibonacci retracement levels derived from the July-September sell-off. Notably, the 76.4% retracement level acted as resistance last week, capping the upside, while the 61.8% retracement level, positioned at 153.41, provided support yesterday.
USD/JPY Daily Price Chart
Chart prepared by James Stanley, USD/JPY on Tradingview
USD/JPY: Short-Term Consolidation Hints at Potential Breakout
Examining the four-hour chart for USD/JPY reveals a defense of prior resistance, coinciding with the psychological level of 155.00. For bullish continuation scenarios to remain viable, buyers ideally need to maintain support at or above this level, paving the way for further upside movement.
USD/JPY Four-Hour Chart
Chart prepared by James Stanley, USD/JPY on Tradingview
GBP/JPY: Navigating Historical Gap Inflections
Similar to USD/JPY, GBP/JPY also presents scenarios conducive to Yen weakness. While the British Pound (GBP) experienced significant weakness against the US Dollar in early Q4, its movement against the Yen (JPY) has been more controlled. The recent price action, however, is particularly noteworthy.
GBP/JPY retraced to test the 193.61 level yesterday, a level marking the lower boundary of a gap dating back to the 2008 financial crisis. Following this support test, a strong bullish reaction ensued, driving a trough-to-peak surge of over 400 pips. The upper boundary of this gap, at 198.08, has also proven significant, acting as resistance and defining the weekly high over the past four weeks.
GBP/JPY Monthly Chart
Chart prepared by James Stanley, GBP/JPY on Tradingview
Analyzing the weekly chart in conjunction with this historical gap reveals that the 198.08 level has indeed posed a challenge for bulls over the past month. However, the subsequent pullback has found support at 193.61, and a retest of the 200-day moving average has also shown signs of resistance turning into support recently.
GBP/JPY Weekly Chart
Chart prepared by James Stanley, GBP/JPY on Tradingview
GBP/JPY: Near-Term Support at Former Resistance
The four-hour chart for GBP/JPY further strengthens the bullish case. The bounce from 193.61 has retraced, but crucially, support is currently holding at the former swing resistance level of 196.15.
GBP/JPY Four-Hour Chart
Chart prepared by James Stanley, GBP/JPY on Tradingview
EUR/JPY: Euro Weakness Exposes Yen Strength Potential
In contrast to USD/JPY and GBP/JPY, which are trading above their 200-day moving averages and showing recent support tests, EUR/JPY tested its 200-day moving average last week, and it held as resistance. This resistance coincided with the 165.00 level. Furthermore, while USD/JPY and GBP/JPY were testing support at 153.41 and 193.61 respectively yesterday, EUR/JPY broke below the prior support level of 161.93, establishing a fresh lower low.
Although EUR/JPY has also experienced a bounce, the current daily candle remains red, unlike GBP/JPY and USD/JPY which are showing green daily candles at present. This relative weakness in EUR/JPY makes it a more compelling candidate for Yen-strength trading strategies compared to the other pairs discussed. The confluent resistance around 165.00 further reinforces this bearish outlook, as explored in the shorter-term analysis below.
EUR/JPY Daily Price Chart
Chart prepared by James Stanley, EUR/JPY on Tradingview
EUR/JPY: Short-Term Bearish Momentum Favors Yen Strength
Another key differentiator for EUR/JPY is its deeper retracement compared to USD/JPY and GBP/JPY. While the latter pairs have pulled back to support at prior resistance, EUR/JPY has declined more significantly. The lower high preceding yesterday’s sell-off was at 163.90, and this morning, the price tested as low as 163.21. The subsequent bounce is testing a swing level at 163.70, but the 163.90 level above presents an ideal area for bears to defend, maintaining the potential for short-term bearish momentum in EUR/JPY.
From a broader perspective, the 165.00 level proved to be a barrier for bulls last week, and this level needs to remain respected to sustain the possibility of deeper bearish moves. This 165.00 area is also in close proximity to the 200-day moving average, highlighting the confluence of resistance factors at play in EUR/JPY.
EUR/JPY Four-Hour Price Chart
Chart prepared by James Stanley, EUR/JPY on Tradingview
— written by James Stanley, Senior Strategist
