EUR/JPY Reaches Record High

As the chart shows, the pair climbed to a new all-time high of ¥179.80 per euro today.

The main driver has been the weakening of the Japanese yen, which continues amid fresh statements from government officials. According to Reuters:

→ Japanese Prime Minister Sanae Takaichi said her administration prefers to keep interest rates low and called for close coordination with the Bank of Japan — a factor contributing to yen weakness.

→ Meanwhile, Finance Minister Satsuki Katayama issued a verbal warning about the yen’s weakness, noting “one-sided and rapid moves” in the currency market. In theory, this should have supported the yen, but judging by today’s USD/JPY movements, the impact was limited.

Technical Analysis of EUR/JPY

Price action continues to form an ascending channel (marked in blue). Following the early October news of Sanae Takaichi’s victory, who is viewed as a proponent of economic stimulus, the yen weakened, and EUR/JPY moved into the upper half of the channel.

Since then, the upper boundary has acted as a key resistance level. Today’s record high serves as yet another test of strength for that level. Given that the RSI is in overbought territory, and long-position holders may be tempted to take profits (at least partially), the market appears vulnerable to a pullback.

Therefore, it cannot be ruled out that we may see:
→ a bearish break of the support line that has held since early November;
→ followed by a retracement to retest the former resistance level around 178.70. A deeper correction towards the channel’s median is also possible.

The future direction of the yen will largely depend on market expectations regarding a potential Bank of Japan rate hike — a likely scenario, as a weak yen increases inflationary pressure on food and energy prices.