As the chart indicates, the EUR/JPY pair has risen above ¥172 per euro — a level last seen in July 2024.

Since early June, the exchange rate has increased by approximately 5.6%. This upward movement is driven by a combination of factors, including:

→ Divergence in central bank policy: The European Central Bank’s key interest rate remains significantly higher than that of the Bank of Japan, making the euro more attractive in terms of yield compared to the yen.

→ US trade tariffs on Japan: The potential imposition of 25% tariffs by the United States on Japanese goods poses a threat to Japan’s export-driven economy, placing downward pressure on the national currency.

→ Eurozone expansion and consolidation: News of Bulgaria’s potential accession to the euro area is strengthening investor confidence in the single currency.

→ Weakness in the US dollar: As the US Dollar Index fell to its lowest level since early 2022 this July, demand for the euro has grown, positioning it as a key alternative reserve currency.

Can the rally continue?

Technical Analysis of EUR/JPY

For several months, the pair traded within a range of approximately ¥156–165 per euro, but has recently broken above the upper boundary of this channel. Based on technical analysis, the width of the previous range implies a potential price target in the region of ¥174 per euro.

It is noteworthy that the rally gained momentum (as indicated by the arrow) following the breakout above the psychological threshold of 170, a sign of bullish market dominance. At the same time, the RSI has surged to a multi-month high, signalling moderate overbought conditions.

Under these circumstances, the market may be vulnerable to a short-term correction, potentially:

→ Towards the lower boundary of the ascending channel (shown in orange);
→ To retest the psychological support around ¥170.

That said, a reversal of the prevailing trend would likely require a significant shift in the fundamental backdrop — for example, progress towards a trade agreement between Japan and the United States.

Trade over 50 forex markets 24 hours a day with FXOpen. Take advantage of low commissions, deep liquidity, and spreads from 0.0 pips (additional fees may apply). Open your FXOpen account now or learn more about trading forex with FXOpen.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.