EUR/JPY Buyers Regain Control Following Break of Weekly Downtrend

07/05/2025

Market Overview

On Wednesday, the Euro gained ground against several Asian currencies, particularly the Japanese Yen, as sentiment tilted in favour of European assets. This came against a backdrop of investor uncertainty ahead of the Federal Reserve’s rate decision, with US Dollar flows stabilising. Meanwhile, continued capital outflows from US markets by major Asian investors have added to the broader repositioning narrative. This macro environment has supported demand for EUR/JPY, especially as eurozone resilience contrasts with Japan’s modest growth signals despite recent data surprises.

Technical Analysis

The EUR/JPY pair has broken decisively above the descending trendline that had contained price since early May, triggering a bullish reversal in the short term. Price action on the 4-hour chart confirmed the breakout by surpassing the previous high at 162.486, and now trades near the 162.655 level. Momentum indicators reinforce this bullish tone—RSI remains above the midline with an upward slope, while MACD has formed a fresh bullish crossover, though the mixed nature of moving averages suggests caution beyond the immediate horizon.

Should buyers maintain control, the next upside targets are 162.788 and 162.974. However, if bullish momentum falters and price slips back below 162.486, immediate support lies at 162.300. A break below 161.998 would invalidate the current bullish structure and reintroduce the bearish outlook.

Key Technical Levels

Resistances: 162.788, 162.974

Supports: 162.486, 162.300, 161.998

Fundamental Drivers

The recent boost to EUR/JPY can be attributed to a mix of risk sentiment and macro data divergence. Japan’s better-than-expected manufacturing PMI has provided short-term support for the Yen, yet hasn’t reversed the capital flight narrative. Meanwhile, attention turns to two key releases—Germany’s industrial production figures and the 10-year JGB auction in Japan. Both could influence flows into or out of the Euro and Yen respectively. Investors also remain alert to the upcoming Fed decision, which, while not directly tied to this pair, could alter broader USD-driven sentiment and cross-asset flows.