As the chart shows, the exchange rate rose above ¥185.00 per euro for the first time ever earlier this week. Today, however, a modest pullback is visible, with the Japanese yen strengthening against the euro.

Fundamentally, this move has been supported by a combination of factors, most notably news from Japan. According to media reports, Japan’s Finance Minister, Satsuki Katayama, said that Tokyo could carry out a joint currency market intervention with the United States to support the yen.

In addition, traders are positioning ahead of an important week, during which:
→ the Bank of Japan will announce its interest rate decision;
→ Japan’s parliament may be dissolved to pave the way for snap elections;
→ euro area PMI figures will be released.

Technical Analysis of the EUR/JPY Chart

Price action continues to form an ascending channel (shown in blue). At the same time, signs of a shift in sentiment have emerged.

At the start of the week, sentiment was bullish:
→ the price broke through a local resistance line and consolidated in the upper half of the channel;
→ it surpassed the December high and moved above the psychological level of ¥185 per euro.

Subsequently, bears took control:
→ the pair failed to hold above the 185.00 level;
→ the price fell back to the channel’s median, which failed to provide meaningful support;
→ the decline continued, with the local 183.9 level switching from support to resistance.

It is reasonable to assume that the lower boundary of the channel could limit further downside in EUR/JPY. However, this support is unlikely to hold if the Bank of Japan, potentially backed by the US, actively steps in to strengthen the yen.

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