Upside Targets for EUR/JPY
On the upside, a target is the all-time high of 177.94 from October 9. Surpassing this level could lead to the upper boundary of the ascending channel near 181.70.
Support is found at 176.00, followed by the nine-day EMA at 175.86 and the channel’s lower boundary near 175.50. Falling below these might weaken short-term momentum, testing near the 50-day EMA at 173.99.
Further decline could challenge the six-week low of 172.14 from September 9. The Euro showed weakness against major currencies, especially against the Australian Dollar in percentage changes.
A heatmap illustrates percentage changes among major currencies. Guidance on investment risks and positions are not provided as they are personal and not advised by FXStreet. The author has no business relationship mentioned and holds no stock positions related to this article.
Potential Investment Strategies
We are seeing a clear bullish trend for EUR/JPY, which is holding firm above the 176.00 level. The cross is staying above its nine-day Exponential Moving Average, and the RSI reading reinforces this positive momentum. This technical setup suggests that buyers are currently in control.
The main driver for this strength is the wide gap in monetary policy between the European Central Bank and the Bank of Japan. With Eurozone core inflation still sticky around 2.5% as of last month’s data, the ECB is expected to keep rates elevated. In contrast, the Bank of Japan has hesitated on further rate hikes, holding its policy rate at just 0.1%.
Given this outlook, we should consider strategies that profit from a continued upward move. Buying call options with strike prices targeting the recent all-time high of 177.94 could be a viable play. If the pair breaks this level, the next major target is near the 181.70 region, offering significant potential.
However, we must watch the 176.00 psychological support level closely. A break below the 175.50 channel support would signal a loss of momentum and could be a trigger to hedge long positions. Purchasing put options with a strike near 175.00 would offer protection against a sharp reversal toward the 50-day EMA.
From a broader perspective, the current low market volatility, with the VIX index hovering around 14, makes the carry trade attractive. This involves borrowing in the low-yielding yen to invest in the higher-yielding euro, providing another tailwind for the pair. We are in uncharted territory, having surpassed the highs last seen back in 2008, which means psychological levels will be key.
